A mysterious black freighter sails through the night, apparently deserted. Detecting a cruise ship close by, the ship alters course as disembodied voices announce in German, "Battle Stations! Enemy in sight!" Aboard the cruise ship, the prickly Captain Ashland is making his final voyage, attended by his replacement, Captain Trevor Marshall, who has brought along his family. The freighter heads right for them, blasting its horn. Despite Ashland's best efforts, the charging freighter collides with the cruise ship, sinking it. (Some of the sinking scenes were taken from the 1960 film The Last Voyage and darkened to match the nightly effect.) The next morning, a handful of survivors—Marshall, his wife Margaret (Howes), and their children Robin and Ben; a young officer named Nick and his love interest Lori; the ship's comic Jackie; and a passenger, Mrs. Morgan—are adrift on a large piece of wreckage. Ashland surfaces nearby and he's brought aboard, barely conscious. Later, the survivors come upon the black freighter, unaware it's the ship that attacked them. Finding a boarding ladder slung from the stern, they climb aboard, but not before the ladder plunges into the sea as the officers try to climb it with the injured Ashland. When all are finally aboard, Jackie tries to rally the survivors with humor, but a cable seizes him by the ankle, and he is swung outboard by one of the ship's cranes, which lowers him into the water before cutting him loose, to be swept astern and lost.
Shocked, the survivors explore the corridors of the empty, echoing vessel, finding only cobwebs and 1930s memorabilia. Hatches open and close by themselves and lights go on and off while a swinging block knocks out Nick, who is exploring above deck. Meanwhile, a delirious Ashland hears a mysterious voice speaking to him in German, telling him "This ship has been waiting for you...It is your new ship....Your chance has come!" The others finally set up in a dusty bunk room, and they separate to retrieve supplies and the injured captain. Mrs. Morgan finds a gramophone and a movie projector that suddenly turn on by themselves. While watching the film (1936's Everything Is Rhythm) and eating a piece of hard candy from one of the ship's cupboards, she becomes grotesquely deformed. Terrified, she stumbles back to the bunk room, where a possessed Ashland strangles her.
Now awake, and apparently possessed by the ship's dead captain, Ashland dons an officer's uniform from the Kriegsmarine and announces that he is the captain. Marshall and Nick make a chilling discovery: the ship was once a Kriegsmarine prison ship, and the ghosts of its inmates and crew are still aboard. They both decide to escape, but are thwarted when the ship's lifeboats lower into the sea by themselves and drift away. Despairing, the survivors try to get some rest but are further taunted by Ashland, who now prowls the ship's passages. Lori goes into shock when her shower water turns to blood; she's then tossed overboard by Ashland. Marshall and Nick are attacked by the piercing whine of the ship's electronics as the projector now shows films of Adolf Hitler. Nick lunges at Ashland, but instead plunges into a net holding skeletal remains, where Ashland drowns him. Marshall manages to stab a gloating Ashland, apparently killing him and stopping the ship. Searching below, Marshall finds a life raft in a freezer full of the frozen bodies of downed RAF airmen and soviet sailors, but as the children are jumping overboard, Margaret is captured by a resurrected Ashland and is trapped in a chain locker. Marshall is knocked out by Ashland, but awakens in time to find Margaret, who has escaped from the locker. Captain Ashland attempts to shoot the escaping Marshall family with a Mauser rifle.
Meanwhile, the spirits of the crew detect another cruise liner and begin to give chase, ignoring Ashland, who wants it to run down the Marshalls' raft instead. Trying to re-take control of the ship, Ashland storms into the engine room and shoots at the machinery in vain, but falls into the steering gear and is crushed to death. His screams of agony echo throughout the ship, joining those of its earlier victims. Above, the Marshalls rejoice as the freighter turns and sails away. After drifting for some time, they are spotted by a search helicopter and rescued.
The Death Ship is shown afterwards steaming along at full speed. The ghosts of the crew once again announcing "Enemy in sight!" in German. It heads for another passenger ship, and the sounds of the collision are accompanied by the triumphant blasting of its horn.George Kennedy as Captain Ashland
Richard Crenna as Trevor Marshall
Nick Mancuso as Nick
Sally Ann Howes as Margaret Marshall
Kate Reid as Sylvia Morgan
Victoria Burgoyne as Lori
Jennifer Mckinney as Robin Marshall
Danny Higham as Ben Marshall
Saul Rubinek as Jackie
Murray Cruchley as Parsons
Film review aggregator Rotten Tomatoes reported an approval rating of 20%, based on 5 reviews, with a rating average of 4.2/10. TV Guide awarded the film 1 out of a possible 5 stars, calling the film "So ludicrous it's quite funny." Jeremy Biltz from DVD Talk gave the film a positive review, writing, "Death Ship isn't a perfect film, but it is an enjoyable one, especially for fans of the somewhat lower tier horror efforts of the late seventies and early eighties."