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The film opens with an animated prologue revealing the origins of leprechauns, stating that they were summoned by a king to protect his gold. After the death of the king the Leprechauns returned to their places of origin, all except one (Warwick Davis) who remained in the mortal world and through the ages slowly became corrupted and obsessed with the treasure he still guarded. In the present, Father Jacob (Willie C. Carpenter) is chased through the construction site of the youth center he had planned on building by the Leprechaun, whose gold Jacob had taken to fund the building project. Using four-leaf clover laced holy water Jacob manages to banish the Leprechaun, summoning demonic hands which drag him underground, but soon after drops dead of injuries inflicted by the Leprechaun during the fight.
One year later, two friends, Emily Woodrow (Tangi Miller) and Lisa Duncan (Sherrie Jackson), have their fortune told when the clairvoyant Esmeralda (Donzaleigh Abernathy) who warns them that they will attain great wealth soon, but it must be denied as it will come at a great price and summon a terrible evil. While having a barbecue at the abandoned youth center construction site with Lisa, their stoner friend Jamie Davis (Page Kennedy) and her ex-boyfriend-turned-drug dealer Rory Jackson (Laz Alonso), Emily falls through a hole and discovers the Leprechaun's gold in an old tunnel where it was hidden by Father Jacob. Evenly splitting up the gold, the quartet of friends use it to fulfill their fantasies, unaware that by taking the gold they have released the Leprechaun, who begins stalking the group (killing a guest by impaling his chest with a bong, taking one of his coins at a party held by Jamie, prompting the police to temporarily arrest him). At the salon where Emily works the Leprechaun sneaks in and, after killing a regular customer, Doria, on the massage table by breaking her neck, attacks Emily, who barely escapes and warns Rory and the recently released Jamie, who rush to get to Lisa's. In her house, Lisa is attacked by the Leprechaun and manages to fight him off for a short while, but is killed when the Leprechaun claws her in the stomach, with her friends finding her body moments later.
While Emily and Jamie want to return the gold, Rory does not and takes off with it; shortly after realizing Rory is gone, Emily is attacked and chased outside by the Leprechaun, but is saved when Rory has a change of heart and comes back for her. Searching for Rory the Leprechaun stops by his house and kills Rory's profligate girlfriend Chanel (Keesha Sharp) by tearing out her upper jaw, reclaiming the gold she used to make a tooth while Rory and Emily are stopped and harassed by Officers Thompson (Beau Billingslea) and Whitaker (Chris Murray). After the Leprechaun appears and kills the two officers, Emily and Rory escape and regroup with Jamie, only to be confronted by a machine gun wielding group of Rory's drug-dealing rivals, led by Watson (Shiek Mahmud-Bey) and Cedric (Sticky Fingaz). Planning on executing Rory for infringing on their territory, Watson and his gang are all disposed of by the Leprechaun, while Emily, Rory and Jamie drive off in Watson's car (which the Leprechaun latches to the bottom of for a short while) and go looking for help from Esmeralda.
Advised to use four-leaf clovers against the Leprechaun by Esmeralda, Rory laces the hollow-point bullets of his gun with clovers Jamie finds in the marijuana Rory had earlier sold him. When the Leprechaun arrives, Rory shoots him several times with the clover bullets, only for his gun to jam before he can finish the Leprechaun off. Rory and Emily are given the chance to run with the gold when the Leprechaun is distracted by Jamie, who is quickly wounded with a baseball bat to the leg, and Esmeralda dies in a magical duel with the Leprechaun. Followed to the roof of the building, Rory tries fighting the Leprechaun and is knocked out, though before the Leprechaun can kill him, Emily taunts him by throwing some of his gold into nearby wet cement and lures him into the ruins of the youth center, where she tosses his gold into a furnace before knocking the Leprechaun in with it.
Believing the Leprechaun is dead, Emily returns to Rory, only for the recovered Leprechaun to renew his attack on them. Knocking Emily off the roof and leaving her barely holding on, the Leprechaun taunts her, but is shot several times in the middle of his speech by Rory, who had fixed his gun. Shooting the Leprechaun repeatedly, Rory runs out of bullets, but distracts him long enough for Emily to hit the Leprechaun with the chest of coins, sending him plummeting off the rooftop and into the wet cement below, where the Leprechaun sinks and becomes trapped with his gold.
The movie then cuts back to the animated prologue like the one at the beginning, and the Leprechaun digs himself out of the ground, leaving a cliffhanger ending.
