The film has Ernest (Jim Varney) accidentally unleashing an army of trolls upon a small town on Halloween. It was shot in Nashville, Tennessee, like the previous films. It was the last movie to be distributed by Touchstone Pictures.
In the 19th Century Missouri, a troll named Trantor (portrayed by Jonas Moscartolo and voiced by Ernie Fosselius), who's responsible for kidnapping children and turning them into wooden dolls, is captured by the townsfolk led by Phineas Worrell, who binds Trantor under the roots of a great oak tree. But before they can complete the ritual, Trantor casts a curse on the townsfolk that he'll return and once he has captured five children, his children will be born from that very tree and overrun humanity. He also curses Phineas that each generation of Worrells would be born less and less intelligent so not to thwart his next attempt. The movie then fast forwards to the 20th century, nearly 100 years later where the legend of Trantor is being told by a girl named Elizabeth (Shay Astar), but the story is dismissed as a folklore and fiction.
Meanwhile, Ernest (Jim Varney) works as a sanitation engineer for the town and is close friends with Elizabeth and her two friends Joey (Alec Klapper) and Kenny (Austin Nagler), the son of Sheriff Binder. After their haunted clubhouse is ruined by the Mayor's (Larry Black) two bullying sons, Ernest promises to find them a better place to build one shortly before he's ordered to clear the land of Old Lady Hackmore (Eartha Kitt), but he and his dog Rimshot are frightened off by her, and when running through her land, he comes across a gigantic tree, which he and the kids decide to turn into a tree house. Unbeknownst to them, it is the same tree under which Trantor is buried, and when Ernest accidentally incites the incantation to summon Trantor, he releases the troll.
Unable to get help from Sheriff Binder, Ernest goes to Old Lady Hackmore for help while Joey falls victim to Trantor. The next day, Joey's disappearance concerns Kenny and Elizabeth while Tom (John Cadenhead) and Bobby Tulip (Bill Byrge), claiming to be the only two to believe Ernest's warnings of a troll take advantage of him by selling him fake troll-trapping devices, many of which backfire. Ernest tries to warn everyone; however, no one believes because they care about the school Halloween dance more than trolls and trick-or-treating.
The parents turn to Sheriff Binder when their children are disappearing. However, Sheriff Binder is too lazy to deal with it and he tells them that their children are at the school for the Halloween Dance.
One of them traps the Mayor's sons in a dumpster, which results in his immediate firing. Meanwhile, Trantor captures a skateboarder and later that night, Elizabeth who finds that Trantor had invaded her bedroom. While trick-or-treating, Kenny is lured away from a friend by hearing Elizabeth's voice and his friend is taken as the fourth victim.
Ernest then learns through a book that Old Lady Hackmore has that two things can destroy Trantor: "The heart of a child." and "A mother's care." An inscription of MI_K is Ernest's only clue which he thinks is "Miak," but he later learns that it's milk, and Old Lady Hackmore learns that "A mother's care" is unconditional love.
Unfortunately, Ernest and Hackmore arrive too late for Trantor to attack and capture the Mayor's youngest son as his final wooden doll, and out of spite, transforms Rimshot as well. Kenny realizes Trantor's weakness, and he gathers the Mayor's other son and a group of the neighborhood kids to fight Trantor with milk. But they're too late to stop Trantor's pods from hitting the ground and giving birth to his children who attack the townsfolk.
Kenny and the others launch a defensive and manage to destroy all of the trolls, except for Trantor who becomes too powerful to be affected by milk. He turns Kenny into a wooden doll and faces Ernest, who realizes that the only weapon that will stop Trantor is the heart of a child and he showers Trantor in love and affection, dancing with him and giving him a kiss on the nose. This overload of affection makes Trantor's head explode and disintegrate, and the people of the town celebrate and congratulate Ernest; to their joy, Trantor's spell is broken on the children he had taken, the five from that night, as well as four children from the 19th century, including Old Lady Hackmore's sister who reunites with her now-older sister. Ernest bouts in depression, wondering if he'd get anything out of saving the town and everyone's lives when Rimshot comes running and leaping into his arms, making it a happy night for everyone.
- Jim Varney as Ernest P. Worrell / Auntie Nelda / Ace Worrell / Bunny Worrell / Others
- Eartha Kitt as Old Lady Hackmore
- Austin Nagler as Kenny
- Shay Astar as Elizabeth
- Jonas Moscartolo as Trantor
- Ernie Fosselius as Trantor (voice)
- John Cadenhead as Tom Tulip
- Bill Byrge as Bobby Tulip
- Richard Wolf as Matt
- Nick Victory as Mike
- Alec Klapper as Joey
- Steven Moriyon as Gregg
- Daniel Butler as Cliff
- Esther Huston as Amanda
- Larry Black as Mayor Murdock
- Denice Hicks as Elizabeth's mother
Ernest Scared Stupid received mixed to generally negative reception in theaters.
The movie debuted at No. 9 at the box office.
- The emblem on the side of the Briarville police car reads "Ignoramus Ad Infinitum."
- The Chiodo Brothers are credited with Special Effects for this movie, who also made Killer Klowns from Outer Space (1988). Trolls in the finale resemble Klowns, as well as the same spinning death effect.
- When Trantor scratches the roof of the truck trying to get to Ernest, you can clearly see that it is cloth ripping instead of the metal on the roof.
- The little girl that Trantor is chasing at the beginning of the movie smiles, even though she's supposed to be screaming in terror.
- While Ernest is falling out of the back of the garbage truck in the beginning, the crew member's leg kicking the block of garbage on top him is visible for an instant.