This movie opens with a news montage explaining that it is set in a dystopic near-future in which George W. Bush has been elected to a fourth term. The United States Congress has been disbanded; public nudity is banned; the United States is embroiled in wars with France, Iraq, Afghanistan, Iran, Pakistan, Syria, Venezuela, Canada, and Alaska. With more wars than there are soldiers to fight them, a secret laboratory run by Dr. Chushfeld (Brad Milne) in Sartre, Nebraska, has developed a virus to re-animate dead Marines and send them back into battle. However, this virus has broken containment and infected test subjects and scientists, and they are at risk of escaping the lab. A team of Marines codenamed the "Z" Squad is sent in to destroy the zombies. One of the Marines named Byrdflough (Zak Kilberg) is bitten but escapes. He ends up in an alley outside an underground strip club named "Rhino". The Marine dies and awakens as a zombie who goes into the strip club.
"Rhino" is run by Ian Essko (Robert Englund). A new stripper named Jessy (Jennifer Holland) has arrived at the club to save up enough money for her grandmother's operation. She is introduced to the club's star dancer, Kat (Jenna Jameson). Kat begins her dance on the stage, but is attacked by Byrdflough. Essko is concerned about losing his best dancer, so he lets her go back on stage as a zombie. To everyone's surprise, Kat is a better and more popular dancer as a zombie than she was as a human.
The other strippers now find themselves faced with the prospect of losing their customers, since the men now prefer zombie strippers to human strippers. One by one, the human strippers become zombies, some by choice in order to compete or (in the case of a Gothic rock stripper Lillith) for fun. During private dances, the zombie strippers bite and kill their customers. Essko tries to keep the zombies hidden in a cage in the club's cellar, but eventually, the zombies escape and overrun the club. The strippers fight each other for supremacy.
The remaining humans in the club struggle to survive until the "Z" Squad burst in to destroy the zombies. But they discover that the zombies were allowed to escape by the Bush Administration, in the hopes that the ensuing zombie plague would distract Americans from their gross mishandling of the war effort and the economy.