The film is based on the werewolf stories in Angela Carter’s short story collection The Bloody Chamber (The Company of Wolves, Wolf-Alice and The Werewolf). Carter herself co-wrote the screenplay with director Neil Jordan, based on her own short stories and also her earlier adaptation of “The Company of Wolves” for radio.

Carter’s first draft of the screenplay, which contains some differences from the finished film, has been published in her anthology The Curious Room (1996).

The film begins in modern times. A young girl (Sarah Patterson) is dreaming.

In her dreams she lives in the middle of a dangerous, mysterious fairytale forest. The wolves in the forest have just killed her older sister (Georgia Slowe). After her sister’s funeral, the girl – named Rosaleen – goes to stay with her Granny (Angela Lansbury). Granny knits Rosaleen a bright red shawl and as she does so, she also tells her a tale in order to warn her about werewolves.

In her tale, a young groom (Stephen Rea) is about to bed his new bride (Kathryn Pogson) when a ‘call of nature’ summons him outside. He completely disappears and his bride is terrified to see wolves howling outside. A search the following day yields a wolf paw print only. Years later, she remarries and has children, only to have her original husband finally return. Angered at her having had children with a new husband, the groom transforms into his werewolf form, but is slain when the new husband (Jim Carter) returns.

The next day, Rosaleen returns to her parents’ village, where she encounters a young, amorous boy (Shane Johnstone) who clearly desires her. That night, Rosaleen wakes and happens to see her parents having sex. The next day, she questions her mother (Tusse Silberg) about the nature of sex. The amorous boy flirts with her again in the morning.

Visiting her grandmother again and sitting in the church graveyard, Rosaleen is told a second story. In Granny’s second tale, a young man is walking through the enchanted forest when he encounters the Devil (Terence Stamp; anachronistically arriving in a chauffered Rolls-Royce), who offers the boy a transformative potion, which ultimately monstrously transforms him against his will.

When the story is finished, Rosaleen receives her new, red shawl. She wears it to church and clearly stands out against the drab surroundings. After church, Rosaleen and the amorous boy go for a walk into the forest. After some coaxing from the boy, the pair of them kiss. Rosaleen soon runs off, straying from the path. Climbing a tall tree and arriving at a Stork’s nest, she encounters various mysterious items, including tiny figurines of babies which hatch from the stork’s eggs. Searching for her, the boy discovers cattle mutilated by a wolf, and alerts the village to the wolf’s presence. Rosaleen returns to the village by herself with one of the baby figurines.

The villagers set out that night to catch the wolf that attacked the cattle. Rosaleen’s father (David Warner) goes with them, his wife offering him their late daughter’s cross for protection. However, he refuses it, claiming that his rifle is the only thing “they” understand.

Rosaleen stays home with her mother and tells her a werewolf story.

In Rosaleen’s story, a woman (Dawn Archibald) ‘done a terrible wrong’ by a rich, young nobleman (Richard Morant) turns up at his wedding party, where she magically transforms the groom, the bride and the guests into wolves. They escape into the forest, but the sorceress commands that the wolves ‘serenade’ her and her child each night.

The people of the village capture the wolf that attacked the cattle, but when Rosaleen’s father returns with the wolf’s paw as a trophy, it is revealed to have transformed into a man’s hand.

Winter comes to the village and Rosaleen, now armed with a knife to protect herself, wanders into the woods and towards Granny’s house. She encounters a charming huntsman (Micha Bergese). The huntsman claims that that he – with the aid of his compass – can get to Granny’s house more quickly across country than Rosaleen can if she follows the path. They make a bet: if she arrives first, he will give her his compass, and if the huntsman wins the race, she will give him a kiss. The huntsman arrives at Granny’s house first and his true, bestial nature is revealed. He kills Granny.

Rosaleen later arrives at Granny’s house. She encounters the huntsman who first tries to fool her by mimicking Granny, but she soon realizes his identity and surmises what has happened. He has her remove her red shawl and burn it on the fire. A pack of howling wolves gathers outside the cottage. Threatened, Rosaleen pulls a gun on the huntsman, but she is gradually won over by his charms and – remembering the terms of their bet – kisses him. However, once again threatened, Rosaleen fires the gun at him, causing him to transform into a real wolf. Rosaleen, suddenly charmed by him in his new, wounded, wolf form, decides to tell him a story.

Rosaleen’s story is about a she-wolf who arrives at a village. Despite meaning no harm, she is shot by a villager. She reveals herself in her human form (Danielle Dax) to an old priest (Graham Crowden), who bandages her wound. Ultimately she returns to ‘hell’ through the village well.

The villagers, led by the amorous boy, later arrive at Granny’s house, worried for Rosaleen. They discover two wolves within the house, one wearing Rosaleen’s cross. The first wolf escapes. Rosaleen’s father tries to shoot at the other wolf but her mother recognizes the transformed Rosaleen and prevents him from firing on her.

The wolves run off into the forest and ultimately, joined by other wolves, into the house of the dreaming girl from the beginning of the film, who wakes up and screams.

The film ends with Perrault’s moral from Le Petit Chaperon Rouge, which warns girls to beware of charming strangers.