In therapy, Donnie reveals what Grandma Death whispered to him: "Every living creature on earth dies alone." He confesses to Dr. Thurman how afraid he is of being alone, and of dying alone.
Watching a Redskins game soon afterward, Donnie is surprised to see, protruding from his father's stomach, a silvery, aqueous blob. The blob stretches out and precedes his father as he gets up to go to the fridge; it looks like a liquid snake and seems to be a visible manifestation of his father's future. Donnie sees his own future flowing out of his stomach; he follows the iridescent snake up the stairs to his parents' room, where he finds a handgun hidden in a closet.
While discussing a class project, Donnie and Gretchen come close to kissing, only to be interrupted when they notice a fat guy in a tracksuit smoking a cigarette and watching them.
Late at night, Donnie sees Frank in his bathroom again. Using a kitchen knife, he taps on the liquidy barrier between them; Frank's right eye flashes as the point of the knife hits the barrier.
Jim Cunningham brings his self-help shtick to a school assembly. Donnie acts up again, demanding to know how much Cunningham is being paid to visit the school and calling him the Antichrist. He is hustled out of the auditorium.
Donnie shows Gretchen "The Philosophy of Time Travel." "I've been seeing stuff," he says, and the book describes the visions he's been having. "It can't be a coincidence," he adds. Donnie and Gretchen try to visit Roberta Sparrow, but she doesn't answer her door. Donnie looks in her mailbox. It's empty.
Donnie finds Jim Cunningham's wallet on the sidewalk. "Now you know where he lives," we hear Frank's voice say.
Having kissed for the first time, Gretchen and Donnie go to a movie, Sam Raimi's "The Evil Dead." Gretchen falls asleep instantly and Donnie sees Frank sitting near them. Donnie asks Frank to take off his bunny suit; Frank removes his mask and reveals himself to be a normal-looking kid with a mutilated right eye. The movie on the screen is replaced by a picture of Jim Cunningham's house. "Burn it to the ground," Frank says.
Meanwhile, Donnie's family is at the school's talent show, where his little sister Samantha's dance troupe, Sparkle Motion (coached by Mrs. Farmer), is performing. They are watched by an enthusiastic crowd and a mysterious woman with a clipboard. (Donnie, having been banned from after-school activities, was not allowed to attend.) As Sparkle Motion performs, we see Donnie torch Jim Cunningham's house. Firefighters discover a kiddie porn dungeon in the ruins of Cunningham's mansion; he is arrested the next day.
A distraught Mrs. Farmer visits Donnie's mom. Sparkle Motion has been invited to perform on "Star Search '88," but Mrs. Farmer has to attend Cunningham's arraignment and cannot chaperone. Donnie's mother agrees to fly to Los Angeles with the girls for the taping.
We see Donnie holding a letter addressed to Roberta Sparrow.
Donnie visits Ms. Pomeroy, who has been fired. She has written the words "cellar door" on her blackboard and tells him that a "famous linguist" declared them the most beautiful words in the English language.
In therapy, a hypnotized Donnie sees Frank again. He freaks out. When he comes to, Dr. Thurman tells Donnie that his pills are placebos.
With both their parents out of town, Donnie and Elizabeth decide to throw a party. The house fills with costumed high-schoolers dancing to Joy Division. Gretchen appears at the door, crying; her mom has disappeared and she's afraid her stepfather has found them. Donnie and Gretchen go upstairs. Bow chicka bow chicka bow chicka bow. While they're doin' it, Donnie's mom calls and tells the answering machine that she and Samantha will be returning on the red-eye. Downstairs, Elizabeth asks a friend if they've seen Frank.
It's midnight. A title card tells us that "six hours remain."
Donnie and Gretchen return downstairs. Donnie sees the future blobs protruding from partygoers' stomachs; he follows his own to the kitchen, where written on the dry-erase board is "Frank was here Went to get BEER." Gretchen's future blob approaches Donnie; he falls to his knees, looks inside it and sees a tunnel of water racing through clouds. He and Gretchen leave the party and ride their bikes, "E.T."-style, to Roberta Sparrow's house.
Once there, they climb through Grandma Death's cellar door; two thugs from their school attack them and force them outside at knifepoint. As they struggle in Grandma Death's dusty front yard, we see approaching headlights in the distance. One of the thugs throws Gretchen to the ground. "Deus ex machina," Donnie says as the car approaches.