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Keller Dover (Hugh Jackman), a deeply religious man who runs a failing carpentry business, attends a Thanksgiving dinner with his family at the house of his neighbors, the Birches. Six year old daughters, Anna Dover and Joy Birch, go for a walk outside with their older siblings, Ralph Dover and Eliza Birch, where they have to be forcefully pulled away from a parked RV they are playing on. After dinner, the younger daughters go back home to get Anna's safety whistle she is supposed to carry at all times, but they never come back. After a police hunt, the RV is found parked in an abandoned area. When Detective Loki (Jake Gyllenhaal), who heads the case; goes to confront the RV's driver, Alex Jones (Paul Dano), he panics, tries to speed away, and crashes.
Alex Jones is taken in for questioning, but he has the intelligence of a 10-year-old, and due to an unspecified incident with snakes as a child, he rarely speaks. The RV shows no forensic evidence indicating the girls were forcibly taken into it, and Alex's low intelligence means he couldn't have hidden such evidence. Also, polygraph tests of him prove inconclusive due to his low intelligence, but he repeatedly denies, in limited words, ever having seen the children. He was raised by his aunt, Holly Jones (Melissa Leo), and his uncle (now deceased), after his parents died when he was six. He spends most nights sleeping in the RV.
As the police are unable to find evidence against Alex, he is released in two days. Keller attacks him in a parking lot, and afterwards claimed that Alex told him, "They only cried when I left them." No one heard this to corroborate, but Keller takes this as proof that Alex took the girls. That night, he abducts Alex at gunpoint while walking his dog, and imprisons him in an abandoned, run-down apartment building he owns. He repeatedly beats Alex for six days for information, and when he cannot beat him any further without killing him, he puts him in a small shower isolated of light, where he can shower him with scalding or freezing water. Keller, and both Franklin (Terrence Howard) and Nancy Birch (Viola Davis) briefly participate, but eventually cannot handle it; however, they do not stop Keller. Detective Loki begins tailing Keller after hearing that Alex went missing, and eventually finds the apartment complex, though he does not discover Alex at the time.
Over the days Alex is being tortured, Detective Loki trails other leads. While investigating sex offenders in the area, he finds that Father Patrick Dunn has a long-dead body in his basement. Father Patrick Dunn claims that he did not know who the man was, but that in a confession, the man was bragging he had killed sixteen children and would continue to do so; he also admits to having a family. Patrick felt killing him was the only way to save the children, and he is arrested for the crime. During a candlelight vigil for the missing girls, Detective Loki notices Bob Taylor (unidentified at the time) acting suspicious, but loses him in a chase. After seeing the news, a department store clerk recognizes him and says he comes in from time to time to examine children's mannequins and buy children's clothing. Loki uses Taylor's license plate to track him down, and finds locked crates filled with snakes and bloody children's clothing. Both the Dovers and Birches identify clothing belonging to their children. Keller begins to regret his actions towards Alex, but still believes Alex may know where the bodies are; Alex mentions a clue about finding them in a maze. Keller goes to "apologize" to Holly for attacking Alex at the police station, but in reality, he is there to judge her reaction after he mentions he's having dreams of Anna in a maze. Holly does not show any reaction to this.
Believing there's a small chance the children might still be alive, Loki beats Taylor while in custody, but Taylor grabs a gun and commits suicide. The blood on the children's clothes is later found to be pig's blood, and the children's clothing were articles of clothing he bought copies of after breaking into the children's' houses. Therefore, Bob Taylor is revealed to be a fake killer copying a book titled, "The Invisible Man". Days later, Joy Birch is found drugged and is hospitalized, but Anna is still missing. In her drugged state, Joy rambles that Keller was there, giving the audience the impression that Keller is somehow in on it. Keller rushes off as Loki chases him. Loki loses him, but heads toward the apartment complex and discovers the imprisoned Alex.