In New York City, era 1930, the performers prepare for a show while dancer Tallulah and stagehand Laszlo kiss in the back and Tallulah waits to see his mother. After she leaves for the show, Laszlo sees… something run past the door. Following it into a storage room, the creature, a pig-headed man, leaps out of the shadows and attacks him.
The TARDIS materializes on Staten Island by the Statue of Liberty and they spot a headline about disappearances in Hooverville, a place for indigents who lost their jobs at the beginning of the Great Depression. They go to Hooverville and meet Soloman, who is trying to rally the people without luck.
Architect Mr. Diagoras is ordering his men to move faster on completing the construction of the new Empire State Building on behalf of his new "masters." When the foreman refuses, Diagoras introduces them to one of his masters: a Dalek. The Dalek is accompanied by pig-headed humans and has the foreman taken away. The Dalek tells Diagoras they need more people and Diagoras promises to get more.
At Hooverville, Soloman explains to the Doctor that people have been disappearing from the camp and the police aren't interested. Diagoras arrives offering a dollar a day to clear a tunnel collapse in the sewers. The Doctor volunteers and Soloman and Martha reluctantly go along with him. The three of them plus Frank are sent to clear a section of tunnel and Soloman explains that Diagoras became successfully overnight. They find a glowing green glob of protoplasm on the floor which the Doctor can't identify. They also notice that there is no sewer collapse.
Diagoras is briefing his remaining workers on the new mast that will top the Empire State Building and tells them to attach plates of an unknown metal to the base of the mast that night. They're reluctant but agree. After they leave, a Dalek arrives and takes Diagoras below for his "reward" and meet their leader. They arrive below and Diagoras meets Lord Sec, leader of the Cult of Skaro. Sec has him taken away.
The Doctor and others hear strange noises in the sewers and spot a figure in the shadows. It's one of the pig-men and the Doctor tries to get through to it. It doesn't attack or put up a fight, but other pig-men arrive and chase after them. They get through a hatch to the surface but they grab Frank and drag him back as the others escape. They discover they're in the theater and Tallulah confronts them with a gun and wants to know where Laszlo is. She explains what happened and once she shows her gun is a prop, the Doctor offers his help and needs to figure out what the bio-material is.
The Doctor rigs up a crude DNA scanner and Soloman goes back to Hooverville, while Tallulah talks about Laszlo and thinks that Marsha and the Doctor are involved. She notes that someone has still been leaving a flower on her dressing table just like Laszlo always does.
Soloman rallies the men in Hooverville to protect themselves and they arm themselves. While the men work atop the Empire State Building to attach the new metal plates, plates made from the Dalek casings. Lord Sec announces they are almost ready for the "final experiment" and Diagoras wants to know how he's involved. Sec says they need "his flesh" The other Cult members argue they are ruining their purity and Sec says he is now ready to make the ultimate sacrifice. He opens his casing and the true Dalek creature within emerges and merges with Diagoras, pulling him into its casing.
The Doctor tries to analyze the bio-sample while the show begins up above with Tallulah as the lead singer. The Doctor continues his work with Martha backstage as she notices a pig-man in the shadows and tries to get through the dancers to get to the man. The Doctor realizes that the bio-sample comes from Skaro while Martha point out the pig-man and Tallulah screams. Martha runs off after the escaping pig-man but ends up in a storage room where other pig-men capture her and escape into the sewers. The Doctor and Tallulah go after her.
Martha is put with the other missing people, including Frank, and taken below. The Doctor spots a Dalek and explains what they are to the skeptical Tallulah. The remaining three Cult of Skaro members consider shutting down the experiment but the smoking Sec insists that the process continues. The Doctor tries to take Tallulah back to the surface but they run into the pig-man from the theater. The creature asks them not to look at it and reveals he was transformed to be one of the Dalek slaves. He escaped before his mind was transformed and tells Tallulah to stay away. It becomes clear that he is Laszlo, transformed into a grotesquerie. Frank agrees to take them to the Dalek base.
The Daleks arrive to take the humans, including Martha, into custody and mention that the Dalekenium metal is in place. They scan the human captives for intelligence and Martha passes, so they take her for the "final experiment." The Doctor decides to follow them and Frank agrees to stay with them after sending Tallulah back. The Doctor then merges in with Martha and the other high-intelligent specimens, while Tallulah gets lost and decides to go back.
The human captives are taken into the lab and the Doctor suggests that Martha ask what is going on. They explain that it is the dawn of a new age and they will evolve to a life outside the shell. Everyone looks on as Lord Sec's casing opens up and a creature emerges: Diagoras, with a Dalek creature merged onto his body.