Four friends—Julie, Helen, Barry, and Ray—are celebrating the Fourth of July holiday in a small coastal town in North Carolina. After a night of festivities and partying, while driving home, they accidentally hit a pedestrian walking along the deserted road. In a panic and fearing for their futures, the group makes a pact to dump the body in the ocean and never speak of the incident again. They go their separate ways, each bearing the weight of the secret as they try to resume normal life.

A year later, as the next Fourth of July approaches, the past comes back to haunt them. Julie receives an ominous note that reads, "I know what you did last summer," triggering a series of events that threatens to expose their dark secret. The friends are reunited by their shared terror, as they are stalked and terrorized by a mysterious figure wielding a hook. Paranoia and suspicion grow as they attempt to identify their tormentor and deal with the consequences of that fateful night.