The room morphs into a boiler room, despite Kincade's attempts to stop it. The screams alert Dr. Simms who is not happy. Joey is on the floor, seemingly in a coma. This is blamed on the Hypnocil Dr. Gordon has prescribed and both he and Nancy are suspended. As he clears out his stuff Neil looks at a photograph and is then distracted by Sister Mary-Helena in the tower. The door is locked but Neil breaks in and climbs the tower. The nun is at the top of the tower.
She reveals that the room was once used to house the most dangerous, criminally insane patients at the hospital. The wing was closed in the forties after a young girl was locked in the wing over the holidays. The inmates kept her hidden for days, raping her hundreds of times. When she was found she was barely alive and was most unfortunately impregnated. The girl was Amanda Krueger, Freddy's mother. She tells Neil that the only way to stop Freddy is to find his remains and then bury them in hallowed ground.
Nancy visits with Joey. She demands that Freddy releases him. The words "Come and Get him Bitch" appear carved on his chest. Nancy wants to go into the dream realm and fight Freddy, but Neil tells her they have another option. She agrees to try and she tells him that only one man will know the whereabouts of the remains. Kristen fights against staff as it is revealed that Nancy has been suspended. She is taken to the quiet room and sedated for her outburst, screaming that Dr Simms is killing them! The man Nancy referred to is revealed to be her father.
They meet him in a bar and he is clearly drunk and although initially pleased to see her when Nancy reveals the reason for the visit is less happy. He insists Nancy just needs to let it go because Krueger is dead. Despite Nancy's pleas he refuses to reveal where the bones are and dismisses her. Nancy is very upset.
Taryn pages Dr. Gordon, informing him that Kristen has been sedated and locked in the quiet room. He urges Nancy to go to the hospital and to convince Dr. Simms what is happening is real. He tells her he will speak to her father and make him tell the location of Freddy's remains. He goes back into the bar, introduces himself and then throws Lt. Donald Thompson against the wall. Neil says that he cares if Nancy lives or dies even if her father doesn't and so they are going on a scavenger hunt.
Neil drives them to a church, takes the keys and leaving Donald outside, goes to get holy water and a crucifix. He is stopped by a priest and leaves his driver's license in return for the things he needs, promising to return them. Nancy arrives at the hospital and Max prevents her from seeing Kristen but reluctantly agrees to let her see the others. She finds them in the TV room and takes them for a last group session.
Neil and Donald pull up at The Penny Bros Auto Salvage yard, the hiding place of Freddy's remains. Going inside, Neil is directed to the heart of the place.
Nancy tells Kincade, Will and Taryn that Joey and Kristen need them. She assures them nobody has to go in, warning them if they die in the dream world then they die for real.
They all want in, and urging them to stick together, they imagine themselves in the quiet room with Kristen. When Nancy counts back from five they are there in the room with Kristen who is delighted to see them. Kristen says that Joey needs them. Nancy asks where he is and at that moment the padded walls are ripped to shreds by Freddy's claws. Terrified the group huddles in the centre of the room, padding showering them.
As the padding clears, Kristen is back in her bedroom, working on the model house as she was the night of her "suicide attempt." She is surprised as her mother bursts in, and the night repeats itself. She gives her mother a huge hug, telling her she has had a terrible dream. She asks her mother to stay with her but her mother has a guest. This time it turns out to be Freddy, who rips Elaine's head off and the decapitated head admonishes Kristen for her attention seeking behaviour.
Freddy tries to stab Kristen but she uses her gymnastic skills to evade him. She jumps out the window but instead of landing outside finds herself in the Elm Street house, rolling down the stairs. Getting to her feet, Kristen calls for Nancy.