The film was rushed into production by American International Pictures and Bert I. Gordon to capitalize on the success of The Incredible Shrinking Man, which had been released in 1957.
The film begins with a Brownie troop visiting a doll manufacturing company called Dolls Inc., owned and operated by the seemingly kindly Mr. Franz (John Hoyt). As the girls tour the factory, they see a number of very lifelike dolls stored in glass canisters locked in a display case on the wall. These are part of Mr. Franz’s special collection.
Sally Reynolds (June Kenney) answers a newspaper advertisement for a secretary; Franz's previous one has mysteriously vanished. Although she is concerned about his obsession with his dolls, she reluctantly agrees to take the job.
A traveling salesman, Bob Westley (John Agar), comes to the office and he and Sally soon develop a relationship. After working at the doll factory for several weeks, Bob asks Sally to marry him and persuades her to quit her job, promising to break the news to Franz.
The next day however, Franz informs Sally that Bob has returned home to take care of business and advises her to forget him. She sees a new doll that looks just like Bob. Frightened, she goes to the police claiming that Franz has somehow shrunk Bob, but Sergeant Paterson (Jack Kosslyn) is skeptical. He investigates, but Franz convinces him that the dolls are just dolls.
When Franz finds that Sally plans to quit, he locks Sally in his lab. It is revealed that he has developed a machine which can shrink people down to a sixth of their original size. He uses it on anyone who tries to leave him; the "dolls" in the glass case are former "friends" stored in suspended animation (which he has also invented). Sally becomes his latest victim.
After a reunion between Sally and Bob, Franz reveals how the process works and why he miniaturizes people (it seems that he developed a strong phobia against being alone after his wife left him). Periodically, Franz awakens his captives to enjoy parties he throws for them.
During a welcoming party for the two newcomers, Franz has to deal with full-size friend and customer Emil (Michael Mark). The prisoners try, but fail to call for help. However, Sergeant Paterson begins investigating Franz, as many people he knows seems to be missing. After Franz is questioned by Paterson, he panics, announcing to his miniature prisoners that he plans to kill them and himself before he can be caught. He takes his troupe to an old theatre, supposedly to test his repairs on Emil's marionette. There, he throws one last party, making his captives act out Dr. Jekyll and Mr. Hyde for him.
Bob and Sally manage to escape and make it back to Franz's workshop. Franz tracks them down, but not before they are able to return themselves to normal size. They leave to fetch the police, despite his feeble pleas. The fate of the other prisoners still miniaturized and frozen is not revealed.
Director Gordon's daughter Susan Gordon appears as a young girl, and another of Gordon's films is referenced when a scene from The Amazing Colossal Man is shown at a drive-in.
The film was shot under the title The Fantastic Puppet People. Director Bert I. Gordon's daughter, Susan Gordon, was a last-minute substitute for another actress who was ill and unable to work. Because of the size-changing aspects of the plot, the film made extensive use of special effects.
The film received mediocre reviews at the time; It has gained somewhat of a cult status among fans of the B movie genre, and its plotline was reused for the French film Le Manteau de Glace. It was later released by Metro-Goldwyn-Mayer on DVD as part of the "Midnite Movies" collection.
The Donald Barthelme 1961 short story The Hiding Fan features two characters viewing the film.