The film begins at a Waco, Texas diner called Cadillac Jack's, where crazed killer Millard Findlemeyer (Gary Busey) opens fire on the Leigh family, killing Jeremy (James Snyder) and James (Newell Alexander), but leaving Sarah (Robin Sydney) and her mother, Betty (Maggie Blye), alive. Findlemeyer is arrested and sentenced to die in the electric chair, due in part to Sarah's testimony. After the execution, Findlemeyer is cremated and his ashes are sent to his mother (E. Dee Biddlecome), a witch who mixes the ashes with a gingerbread spice mix.
Some time later, The Bakery, a pastry shop run by the surviving Leighs, is in dire straits and Betty has been reduced to a shotgun-toting alcoholic who shoots down the banner of the new restaurant opening across the street; Sarah sends her home with Bakery employee Julia (Daniela Melgoza) The restaurant owner, Jimmy Dean (Larry Cedar) arrives to complain about the banner and attempts to buy Sarah out, so he can knock down The Bakery, which he disdains as an eyesore. After exchanging hostilities with Lorna (Alexia Aleman), the Dean daughter, Sarah defers the decision.
Returning to work, Sarah and Brick Fields (Jonathan Chase), another Bakery employee, find a mysterious gingerbread spice mix left at their doorstep by Findlemeyer's mother. They set to using the mix, but Brick cuts himself, allowing his blood to pollute the dough. Sarah permits him to leave early so he can pursue his amateur wrestling career as The Butcher-Baker at Wrestlepalooza. She then makes a large gingerbread man with the contaminated dough and puts it in an industrial oven to bake.
Lorna has returned and planted a rat in The Bakery so the health department will shut them down, but is discovered by Sarah. A physical fight ensues, during which Lorna hits a switch that causes a surge of electricity into the oven where the gingerbread man is cooking, animating it.
Amos Cadbury (Ryan Locke), Lorna's boyfriend, who has gotten tired of waiting outside for her, arrives on the scene. Sarah removes the gingerbread man from the oven, at which point the newly-dubbed Gingerdead Man leaps up, taunting them. They attempt to lock the living cookie in the freezer and Sarah tries to call the police, but the line is dead. Lorna calls her dad on Amos' cell phone before the batteries go dead.
Betty comes back to look for her stash of alcohol and Julia comes back looking for Betty. Each is, in turn, assaulted by the Gingerdead Man; Betty loses a finger and is put into the oven, while Julia is knocked out by a frying pan, encased in frosting, decorated, and left in the freezer.
Amos returns to his car and retrieves a handgun.
Jimmy Dean arrives to pick up Lorna. While he investigates Amos' car, the Gingerdead Man takes his car and, using a rolling pin to operate the accelerator, runs him over.
Amos and Sarah discover and rescue Julia from the freezer. Sarah tells Amos that she thinks the killer cookie is Millard.
Lorna decides to wait for her father outside, but discovers only his sprawled body. She steals his ring and heads back inside, where she triggers a tripwire that lodges a knife into her forehead, killing her.
Sarah and Amos find Betty and attempt to rescue her from the oven, but the Gingerdead Man locks Sarah in the oven and knocks Amos out with a hammer.
Amos recovers, shoots the oven door's lock off, and saves Sarah. Brick returns. The Gingerdead Man get Amos' pistol and opens fire. Julia and Brick managed to subdue him and Brick eats the cookie's head.
Their problem briefly appears to be resolved, but Brick turns out to be possessed by the Gingerdead Man. He is pushed into the oven and baked to death.
Several months later, Betty, Sarah, and Amos are having a bake sale to raise money for the hospital, with a little help from two nurses (Debra Mayer and Kaycee Shank). Two kids asks if they have any gingerbread cookies, and one of the nurses tells them that an older lady (presumably Millard's mother) stopped by a few minutes ago and dropped some off. The nurse opens the box, revealing five gingerbread cookies, who open their eyes. One of the gingerbread cookies is bought by a woman, who also buys a box full of pastries and ships them to her sister in L.A., setting up the plot for the sequel.