Nightmare Alley chronicles the rise and fall of Stanton “Stan” Carlisle from a meager carnival barker to a famous mentalist. The film begins at a traveling carnival filled with strong men, bearded women, and your typical freaks and geeks. The geek in particular strikes a nerve with Stanton as he is as low a performer as you can get — a drunk with no self-respect, eating live chickens in a sideshow, until he drinks himself to death.
Also at the carnival is Mademoiselle Zeena and her alcoholic husband, Pete. The two of them used to have top billing with an act that made Zeena look like she had incredible mental powers. The act involves using an intricate code between two performers, and many people have offered to buy the trick for a ton of money from Zeena, but she’s holding out to use it as a nest egg later in life.
Stanton tries to seduce Zeena into teaching him it, but she remains faithful to Pete out of guilt. She played a part in Pete’s own downfall as an alcoholic, and still has hopes of sending him to rehab to get better.
However, on a dark Texas night, Stanton “accidentally” gives Pete a bottle of wood alcohol instead of what he thinks is moonshine. Pete dies of alcohol poisoning. Zeena must now teach someone the code so she can keep her act going. While racked with guilt over Pete’s death, Stanton convinces her anyway that he can be her assistant.
Meanwhile, Stanton has also been romancing Molly on the side. When the carnies find out, Bruno the strongman forces the two to get married. They then force the newlyweds to leave the carnival, but Stanton seizes on this new opportunity.
They move to Chicago where Stanton becomes The Great Stanton. While they have much success performing in the top clubs of Chicago, Pete’s death still weighs heavily on Stanton. He reaches out to psychologist Lilith Ritter, and clears his conscious over Pete’s death.
It’s part of Lilith’s routine to record all of her sessions with her patients, so she now has a lot of dirt on Chicago’s social elite. Lilith is every bit as unscrupulous as Stanton, and she feels she has a lot in common with him. The two decide to use their powers for evil against her hapless patients.
Lilith gives Stanton private information about them which he uses in his act to convince them he can communicate with their dead friends and relatives. The plan works until the two try to swindle Ezra Grindle into believing Molly is the ghost of his long-lost love. While Grindle is very skeptical, their ruse fools him to the point he breaks down over the heartache.
Molly refuses to play along any further, and she tells Grindle the truth. Now that Stanton is revealed as a fraud, he gets ready to flee Chicago only to find that Lilith has double crossed him. She only gives him $150 of Grindle’s $150,000 they stole from him. She threatens him that she will use her recordings of Stanton’s confession she made to use against him if he tries to implicate her in the scheme.
With the jig up, Stanton gives Molly the $150, and tells her to go back to the carnival where people truly care for her. He then leaves to drink himself to death. Eventually, a down-on-his-luck Stanton finds himself with a job at another carnival as the geek. Biting the heads off live chickens leads Stanton to true madness.
Oddly, Molly now works at the same carnival, and when she sees him, she vows to nurse him back to health. However, Zeena was never able to fix Pete. Can Molly succeed with Stanton? The film ends before we can know.