The film was released on March 6, 1987 and was a commercial failure, grossing $3.5 million worldwide against budget of only $2 million.
A violent thunderstorm strands six people in the gothic English countryside: little Judy, who is traveling with her selfish, uncaring father, David Bower, and her callous, arrogant stepmother Rosemary. They are accompanied by Ralph, an amiable, mild-mannered businessman, who has given a ride to Isabel and Enid, two British punk rock girls who are hitchhiking. They all wind up at a mansion inhabited by Gabriel and Hilary Hartwicke, a kindly elderly couple who appear to be toy makers; their house literally abounds with dolls, puppets, and other beautifully detailed toys. They give Judy a new doll, Mr. Punch, after she had been forced to give up her old teddy bear by her cruel stepmother before they arrived at the house. The Hartwickes invite the stranded travelers to join them for dinner and stay as guests until the storm ends.
One by one, the overnight guests (excluding Judy) are attacked by dolls, who turn out to be cursed, immoral people that have been killed and imprisoned in toys to pay for their crimes. The first to suffer the wrath of the dolls are the two female punks, for trying to steal antiques from the house which they believe to be valuable. Isabel, who is beautiful but rude and vain, is brutally beaten by the dolls, who smash her head into a wall before dragging her into the attic to become one of them. Enid is shot by a group of toy soldiers after finding her nearly transformed friend and attempting to escape. For her constant berating of her stepdaughter, Rosemary is ambushed and stabbed repeatedly by the toys before leaping to her death out of the window into a mutilated mess. Her body is brought back to the bedroom, where she is found by her husband. Thinking that Ralph murdered her, David prepares to kill him.
In the meantime, Ralph accompanies Judy for her search of the first punk girl after he notices blood on the little girl's slippers. They encounter the dolls and Judy reveals they're alive, but Ralph gets caught up in a trap the dolls set up for the other guests. Before any further damage is done, Judy appeals to the dolls to help Ralph out; after some fixing up and reorganizing, the dolls apologize for the accident and agree to let them pass. However, they are both attacked and knocked out by Judy's maddened father; but before he can kill them, the dolls intervene, dragging the unconscious Ralph and Judy away to safety while Mr. Punch distracts David. Mr. Punch is destroyed by David after a fierce struggle.
David is then confronted by Gabriel and Hilary. It is revealed that Gabriel and Hilary are actually a wizard and witch couple who see toys as the heart and soul of childhood and believe toys will be around for as long as children (or even those with the hearts of children) want them. They also believe that the bitterness adults feel can turn to love if they surrender to the goodwill that toys provide. They explain that people come to their house every now and then and spend the night. When this happens, they test their visitors to see if they can change, giving them a sporting chance to save themselves. Some people like Ralph (people who are able to see the love and respect of childhood) are saved/spared and leave the house with a much better perspective of life. However, the ones like David, Rosemary, and the two punk girls who refuse to show respect to childhood and don't change their ways, never leave and have to start over and play a new role in the world of children by becoming toys. It is shown what that new role is when David is transformed into a doll to replace Mr. Punch.
The next morning, Ralph and Judy wake up and are convinced by Gabriel and Hilary that the night's events were all just a dream, and receive a letter saying that David is leaving Judy behind because he never was a good father to her and that she will be much happier living in Boston with her mother. The letter also states that her father and stepmother are moving to another country and changing their names and have also taken the two girls with them, but have left enough money behind for Judy and Ralph to buy plane tickets back to Boston. Ralph and Judy then leave the house together after being bid farewell by Gabriel and Hilary, who even invite them to come back whenever they want and even rejoin Judy with her lost teddy. After Judy returns Teddy to the old people as a gift, she and Ralph then drive off for the airport. Judy, who has grown quite fond of Ralph, tells him that he will really like her mother and hints to him that if he would like to stay with her and her mother, he could be Judy's new father. Though Ralph does not answer, he seems interested in the idea.
The film ends with Mr. and Mrs. Bowers and the punk girls sitting on a shelf as dolls. Just then, another car with another family with a set of obnoxious parents suddenly arrives and their car gets stuck in a mud hole yards from the mansion.Ian Patrick Williams as David Bower
Carolyn Purdy Gordon as Rosemary Bower
Carrie Lorraine as Judy Bower
Guy Rolfe as Gabriel Hartwicke
Hilary Mason as Hilary Hartwicke
Bunty Bailey as Isabel
Cassie Stuart as Enid
Stephen Lee as Ralph Morris
Stuart Gordon was, at one point, very interested in directing a sequel to this film. The initial storyline would have followed Judy and Ralph back to Boston in which Ralph would have indeed married Judy's mother and they would all become a family. Until, one day Judy would receive a box sent from England which would contain the toy makers, Gabriel and Hilary, as dolls. The said sequel never happened.
Critical reception for Dolls has been mixed to positive, and the film currently holds a 58% approval rating at review aggregator website Rotten Tomatoes. Ain't It Cool News reviewed the DVD, calling it "a movie that really stands above the type of film you might expect from this era, with this subject matter." Roger Ebert's review of the film was mostly negative, writing "At some point Dolls remains only an idea, a concept. It doesn't become an engine to shock and involve us," though he also conceded that the film "looks good" and "the haunted house looks magnificent. HorrorNews.net's Jeff Colebank listed the toymaking couple as one of the "13 Best Horror Movie Couples", stating that Rolfe was "the creepiest toymaker of them all". Allmovie's review of the film was mildly favorable, calling it "a serious-minded, lovingly-crafted modern fairy tale that only misses classic status by a few clumsy, low-budget moments."
Dolls was released to DVD by MGM Home Video on September 20, 2005, as a Region 1 widescreen DVD and by the Scream Factory division of Shout! Factory (under license from MGM) on November 11, 2014 as a Region A widescreen Blu-ray.