The story follows a family of inbreeds who have been afflicted by a genetic disorder known as ‘Merrye syndrome’, named after the family in which the disorder developed. This malady causes its victims to enter a state of age regression that starts at the age of ten and continues throughout the remainder of the person’s life, rendering them with the intelligence of a child. The final generation of the family has been entrusted to the care of the family chauffeur (Lon Chaney Jr), and all is well for these odd people until a greedy branch of the family decides that they want to relieve the family of its home. Mental illness has always, and will always be, a fascinating subject for horror movies as it probes into the unknown and Spider Baby makes best use of that fact.

When her husband John has a heart attack while out in a rowboat on the lake, Louise Haloran throws his body overboard and later tells the family that he has left on an urgent business trip. Her main concern is that she can only inherit a part of the family fortune if if her husband is alive. The Halorans are a strange family, still grieving over the death of the youngest daughter Kathleen who drowned in a pond when she was just a child. They hold an annual ceremony of remembrance every year on the anniversary of her death. This year however, someone is wielding an ax intent on murder.