Harry Beckmeyer (Barry Otto), an Australian anthropologist, obtains film footage from 1905 which shows Australian Aborigines ceremonially sacrificing a wolf-like creature. Alarmed by the reports of a werewolf killing a man in Siberia, Beckmeyer tries to warn the US President (Michael Pate) about widespread werewolf attacks, but the President is dismissive.
Meanwhile, Jerboa (Imogen Annesley), a young Australian werewolf, flees her sexually abusive stepfather, Thylo (Max Fairchild). After spending the night on a park bench near the Sydney Opera House, she is spotted by a young American, Donny Martin (Leigh Biolos), who offers her a role in a horror film, Shape Shifters Part 8. Jack Citron (Frank Thring), the film's director, praises her natural talent and hires her immediately.
After Jerboa and Donny attend a film which depicts a werewolf transforming, she insists that "it doesn't happen like that" and admits she is a werewolf to an unbelieving Donny. After they have sex, Donny notices that Jerboa's lower abdomen is covered in downy white fur and a large scar.
At the wrap party for the film, Jerboa is exposed to strobe lights which make her start transforming. She flees the party and is hit by a car. At the hospital, doctors find she has a marsupial pouch and striped fur on her back like a thylacine. Doctors also discover that Jerboa is pregnant and question Donny about her unusual anatomy.
Beckmeyer's father disappears in the Outback shortly after recording a film of tribal villagers killing a werewolf. Three of Jerboa's sisters track her to Sydney and take her back to the pack's hidden werewolf town, Flow (wolf spelled backward).
Beckmeyer and his colleague Professor Sharp (Ralph Cotterill) spend the evening watching a visiting ballet troupe practice. They witness the prima ballerina, Russian Olga Gorki (Dasha Blahova), transform into a werewolf, to the horror of her troupe. She is captured and taken to a laboratory but quickly escapes. She makes her way to Flow, where the pack wants her to be Thylo's mate.
Jerboa gives birth to a baby werewolf which crawls into her marsupial pouch. Donny informs Beckmeyer that his girlfriend is from Flow and they attempt to find her. Jerboa smells Donny nearby and meets him at night. She shows him their baby boy and tells him about the impending danger; they flee to the hills.
The next morning a government task force captures the werewolf pack. Beckmeyer convinces Olga to allow scientists to study her and Thylo. After Thylo is tortured with strobe lights to make him transform, Beckmeyer frees him and Olga. The trio escape into the Outback and find Kendi (Burnham Burnham), Donny, Jerboa, and the baby.
Kendi summons the spirit of a phantom wolf which massacres hunters pursuing the group. Kendi is cremated, but the smoke alerts soldiers who are still in pursuit. Kendi's skeleton attacks the soldiers before being destroyed by a soldier's machine gun. At night, Thylo also summons the spirit and is transformed into a huge wolf who attacks the remaining soldiers before being killed by a bazooka blast that destroys the rest of the encampment.
Olga and Beckmeyer fall in love and hide with Jerboa and Donny at an idyllic riverside camp. Eventually Jerboa and Donny leave, assuming new identities; the Beckmeyers remain behind to raise their daughter and newborn son. Sharp locates Harry and informs him that all lycanthropes have been given amnesty due to the crimes committed against them. The Beckmeyers move back to the city.
Several years later, while teaching a class in Los Angeles, Beckmeyer is approached by a young man who introduces himself as Zack, Jerboa and Donny's son. Zack informs Beckmeyer that his parents are living in Los Angeles under new identities: Jerboa is now the famous actress "Loretta Carson" and Donny is the famous director "Sully Spellingberg".
That night, Olga and Beckmeyer watch Jerboa win a best actress award on a television show hosted by Dame Edna Everage (Barry Humphries). As Jerboa accepts the award, the flashing cameras and stage lights cause her to change into a werewolf. Olga also transforms, to her husband's dismay. Jerboa goes on the attack as her sisters howl in glee; Sharp is seen in his living room smiling deviously.
The final shot is of a thylacine, or Tasmanian tiger, a marsupial carnivore which was hunted to extinction by Australian farmers to protect their sheep.