The third Nightmare continues Freddy's story with the nightmare of a teen named Kristen,who narrowly escapes becoming another of Freddy's victims. Her near death dream is thought to be a suicide attempt and lands her in a psychiatric hospital with other "suicidal" teens who also seem to share the same boogeyman in their dreams. Enter Nancy, the sole surviver of the first Nightmare movie. Nancy has just accepted a position as a research scientist at a psychiatric institution and is working with a group of children who all share nightmares of Freddy. She discovers that one of the children (Kristen) has a special gift which may help them destroy Freddy forever.