A horse box materialises out of thin air at a circus. A thin, bearded man dressed in a black suit introduces himself as the Master to the circus owner, Luigi Rossini, and hypnotises him; this allows him to use Rossini and his crew to help him break into the National Space Museum and steal the sole surviving Nestene energy unit. At UNIT headquarters, the Doctor meets his new assistant, Josephine Grant. She accidentally causes a small fire in the Doctor's lab, but puts it out.
Meanwhile, the Master takes the energy unit to a radio telescope facility, killing the technician on duty. The Master hooks up the energy unit to the radio telescope and sends a signal into space. Another technician, Professor Phillips, arrives and confronts the Master, only to be brought under his control.
At UNIT Headquarters, the Doctor is dismayed that he has not been assigned a scientist as the replacement for Liz Shaw, who has returned to Cambridge, he reluctantly accepts her when he hasn't the heart to tell her otherwise. Reports of the theft of the Nestene unit and sabotage at the radio telescope facility lead the Doctor, Brigadier Lethbridge-Stewart and Jo to investigate. At the facility, the Doctor encounters a fellow Time Lord who warns him that his old enemy, the Master, is here and will try to kill him.
In the meantime, the Master arrives at a local plastics factory and introduces himself as "Colonel Masters" to the young manager, Rex Farrel. He easily hypnotizes Rex and takes over the factory's production to build Autons. James McDermott, Rex's assistant and head of production, gets suspicious of Colonel Masters and calls up Rex's father, the owner of the factory. Jo, while investigating Farrel's factory, is discovered by the Master, who wipes her memory of meeting him and sends her back to UNIT. When the chained-up box that used to contain the unit is brought to UNIT headquarters, Jo offers to open it. The Doctor realises that Jo has been hypnotised and that the box is a trap. Jo, however, shouts out she has to open the box.
The Doctor manages to throw the open and smoking box (which contains a powerful bomb) out of the window, where it explodes in the river. Jo falls into a catatonic state from which the Doctor revives her, but she is unable to remember where she met the Master. At the factory, Mr. McDermott confronts the Master, and is killed by a plastic chair that swallows him up and suffocates him. The elder Mr. Farrel arrives, threatening to retake the factory, and his will is strong enough to resist the Master's hypnotism. The Master sends Mr. Farrel home with a plastic troll-like doll. It laters comes to life when put on the radiator and strangles him.
Searching for Professor Phillips, the Doctor visits Rossini's circus. He is captured by Rossini just as he is about to open the Master's TARDIS and is tied up. He is freed by Jo, who had followed the Doctor there against orders. Professor Phillips, also under the Master's influence, tries to kill Jo and the Doctor with a sophisticated grenade. The Doctor urges Professor Phillips to resist the Master's control, and Professor Philips is killed while trying to throw the explosive away. The Doctor enters the horsebox and removes something from it, only to be attacked by Rossini and his men. Seemingly rescued by two policemen, the Doctor and Jo are driven away from the scene just as the Brigadier and Yates arrive, and follow them. Inside the police car the Doctor and Jo see that instead of going back to UNIT, the car has arrived at a quarry. The Doctor gets suspicious and unmasks one of the officers as an Auton.
The Doctor attacks the driving Auton, but the car crashes into some rocks. Escaping from the vehicle, the Doctor and Jo hide as the Brigadier and Captain Mike Yates arrive. A firefight breaks out between them and the Autons from which they manage to escape. Back at UNIT, the Doctor fits the dematerialisation circuit from the Master's TARDIS into his own and tries to take off, but only manages to produce a lot of smoke because of incompatibile systems. His frustration turns into amusement, however, when he realises that without the circuit, the Master is now trapped on Earth as well.
Meanwhile, Autons dressed in flashy costumes and plastic carnival heads hand out plastic daffodils to the public. Soon deaths from asphyxiation, shock, and heart failure are being reported across the country. The only connection is between the first two victims - McDermott and the elder Mr. Farrel. Interviewing Mrs. Farrel, Jo and the Doctor discover her husband's concerns about "Colonel Masters".
The Master, meanwhile, has infiltrated UNIT headquarters disguised as a telephone technician and installs a long, plastic telephone cable in the Doctor's lab. The Doctor brings the troll doll back to UNIT to examine it, but it is simply solid plastic. While the Brigadier and the Doctor are at the factory, the doll comes to life due to its proximity to a Bunsen burner and tries to attack Jo, but Yates arrives and shoots it. At the now empty factory, the Brigadier and the Doctor discover that Rex Farrel has chartered a bus. They also find a plastic daffodil, providing the connection between the factory and the Master.
Back at UNIT, Yates tells the Doctor about the doll, but using heat on the daffodil fails to activate any sinister function. The telephone rings, and it is the Master, who bids the Doctor goodbye as he sends an electronic signal across, causing the telephone cable to begin to strangle the Doctor.
Luckily the Brigadier hears the Doctor's cries for help and disconnects the cable. The Doctor tells him that the Nestenes can put life into anything made of plastic. The Brigadier says there is a lot of plastic around. Then the Brigadier calls out an airstrike on the Auton bus.
As the Doctor tries to decode the Nestene instructions imprinted in the plastic flower, a radio signal from a walkie-talkie accidentally activates it. The daffodil sprays a plastic film over Jo's face, nearly suffocating her until the Doctor removes the film with a spray. The plastic quickly dissolves soon after, explaining why it was not found at the sites of the deaths.
The Master arrives at UNIT to retrieve his dematerialisation circuit, threatening to kill Jo if he does not hand it over. Jo, trying to convince the Doctor not to do so, blurts out that the airstrike has been confirmed. With this revelation, the Master decides to bring Jo and the Doctor with him as hostages. The Brigadier has no choice but to abort the airstrike, and the bus drives off to the radio telescope. Farrel, regaining his mental independence at last, tries to crash the bus in a field, but the Master hits him on the back, and the Doctor and Jo escape. The Master kills a scientist by throwing him over the side of the staircase on his way to the radio telescope.
UNIT troops engage the Autons while the Doctor and the Brigadier pursue the Master into the facility's control room. The Master declares that the invasion force is about to arrive by traveling along the frequency he created. However, the Doctor convinces the Master that the Nestenes will not distinguish between ally or foe once they arrive. Together, they close the channel for the invasion, driving the Nestenes back to wherever they were coming from and causing the Autons to collapse. While the Doctor and the Brigadier catch their breath, the Master vanishes.
At the bus, the Master emerges, apparently surrendering, but when he pulls out a gun, Yates shoots him. The Doctor peels back the disguise on the corpse to reveal that it is Rex Farrel masked to look like the Master. The real Master drives off in the bus. However, with the dematerialisation circuit in the Doctor's hands, the Master is still trapped on Earth. Back at UNIT, The Doctor remarks to Jo and the Brigadier that he looks forward to their next encounter.