Tracking two lost lumberjacks through the night, a rescue team nearly follows a hound over a cliff. Two men rappel down to retrieve the fallen hound, but they are killed.
Dr. Robert Verne (Robert Foxworth) is fed up with dealing with the squalor of city tenements. He does not feel he is making a difference. He accepts a job from the Environmental Protection Agency to write a report on a logging operation near the Androscoggin River in Maine. The loggers are in a dispute with the local American Indian "Opies" (i.e., "O.P.s"), the original people.
Dr. Verne's wife Maggie (Talia Shire) accompanies him on the trip. She is pregnant but is apprehensive to tell her husband as he is set against having children. They also meet Bethel Isely (Richard A. Dysart), the director of the paper mill, who is to be their host. He tells them about his missing rescue team and lays the blame at the feet of the Opies. The latter have their own explanation: Katahdin, a vengeful spirit of the forest that has been awakened by the activities of the loggers. Isely describes Katahdin as "larger than a dragon with the eyes of a cat".
As Isely drives the couple to their cabin, their path is barred by a party of Opies. They refuse to let Isely's people pass and a fight ensues between the leader of the Opies John Hawks (Armand Assante) and Kelso (Everett Creach), one of Isely's heavies.
While fishing, Verne sees a huge salmon devour a duck. Later, after he and Maggie have eaten his catch, they are attacked in their cabin by a deranged raccoon. Verne kills it and sends a tissue sample to be tested.
The next day Hawks and his wife Ramona (Victoria Racimo) approach Dr. Verne to put over their side of the story. If Verne is concerned about the environment then he should include the people in his assessment. Something is making the people ill: still births, mental illness and birth defects are rife. Hawks takes Verne and Maggie to the home of Hector M'Rai (George Clutesi), Ramona's grandfather. Hector claims to have seen Katahdin and describes him as "part of everything in God's creation". Verne sees plant roots growing on the surface that should be underground; Hawk nets a bullfrog-sized tadpole from the water to show Verne; Hector has cigarette burns on his hand but feels no pain. As the evidence mounts the idyllic setting gradually takes on a sinister hue.
Verne and Maggie tour the paper mill to look for incriminating evidence but the chemicals used in the processing are demonstrated to never leave the plant. Isely tells them that the water is routinely tested for purity. As they leave, however, Verne notices mercury deposits on Maggie's boots. It is a mutagen that causes birth defects and progressive nerve damage. It has long been used in logging as a fungicide because it is cheap. It will not show up in Isely's water purity tests because it sinks to the bottom. Verne needs more evidence and determines to take blood tests from the Opies.
