In 1981 Brookfield, Connecticut, Ed and Lorraine Warren assist at the frantic exorcism of eight-year-old David Glatzel. During the violent spiritual struggle, David attacks his family with unnatural contortionist strength. Desperate to save the boy, his sister's boyfriend, Arne Cheyenne Johnson, challenges the demon to leave David and enter his own body instead. The demon takes the offer; Ed witnesses the transfer right before suffering an incapacitating heart attack.

Ed wakes up in a hospital coma days later and immediately warns Lorraine that the demonic force moved into Arne. By then, it is already too late. While working at a local dog kennel, Arne suffers vivid waking hallucinations and enters a trance, stabbing his landlord Bruno Sauls twenty-two times with a pocketknife. Arrested on the spot, Arne faces first-degree murder charges and the death penalty.

The Warrens convince Arne's defense attorney to plead not guilty by reason of demonic possession, a legal first in American courts. To prove demonic influence to the judge, Ed and Lorraine search the Glatzel home and discover a carved witch's totem beneath the floorboards. Realizing this was not a random demonic possession but a targeted curse, they trace a similar totem found in an unsolved murder case in Danvers, Massachusetts.

Their investigation leads them to Father Kastner, a former priest who spent decades cataloging satanic cults. Kastner reveals the totems belong to an Occultist who must sacrifice three souls: the child (David/Arne), the lover (the Danvers victim), and the master of faith. In a dark twist, the Occultist is revealed to be Kastner's secret daughter, Isla, whom he hid away in his basement while studying forbidden rituals.

As Isla uses blood rituals to compel Arne to commit suicide in his prison cell, she casts a counter-hex on Ed to force him to kill Lorraine. In the underground tunnels beneath Kastner's home, a possessed Ed attacks Lorraine with a sledgehammer. Lorraine reaches through the haze of possession by reminding Ed of their lifelong love. Breaking free of the curse, Ed smashes the satanic altar with the hammer, terminating the ritual. With her dark pact broken, the demon claims Isla's soul, violently contorting and killing her on the spot.

Arne Johnson is convicted of manslaughter rather than first-degree murder, serving five years of a ten-to-twenty-year sentence with the Warrens' active support. While in prison, he marries his loyal girlfriend Debbie Glatzel.

Back at their home museum, Ed places the witch's totem in a secure display case alongside the cursed relics of their past cases. Ed leads Lorraine outside to their garden, revealing an exact replica of the gazebo where they first shared a kiss years earlier. The movie closes by reaffirming that their enduring bond of faith and love is their true shield against supernatural evil.