As with the other Treehouse of Horror episode, it contains three self-contained segments. In "Attack of the 50-Foot Eyesores", a freak storm brings Springfield's oversized advertisements and billboards to life and they begin attacking the town. The second segment, "Nightmare on Evergreen Terrace" is a parody of the "A Nightmare on Elm Street" film series, in which Groundskeeper Willie attacks schoolchildren in their sleep. In the third and final segment, "Homer3", Homer finds himself trapped in a three dimensional world.
Krusty as the Headless Horseman from The Legend of Sleepy Hollow, is holding his laughing head, and hurling it at the camera, which makes the show's title appear on screen in blood. We hear Krusty do his trademark groan. Later The family are hanged on nooses, staring blankly. Despite being dead from asphyxiation, Maggie manages to suck on her pacifier (possibly because she's not heavy enough to choke from the noose).
When Homer goes to Lard Lad Donuts to get a "Colossal Donut", he denounces their advertising when he realizes that the "colossal donuts" aren't very colossal. So, in revenge, he steals the Lard Lad mascot's metal donut. In the midst of a freak storm, Lard Lad and other giant advertising figures come to life to terrorize Springfield. Homer eventually returns the donut, but Lard Lad and his friends simply keep right on destroying. Finally, Lisa goes to an ad agency, and an executive suggests not to look at the monsters. He tries to write a song, but suggests it would actually sound better coming out of Paul Anka, who performs the song "Just Don't Look" with Lisa. The citizens of Springfield do not look at the monsters, who lose their powers and become lifeless. But Homer is still paying attention to Lard Lad and the metal donut, everyone tells him to look away but he is more interested in the donut until Bart and Lisa pull him away, causing Lard Lad to collapse.
In a parody of Nightmare on Elm Street Bart is outside playing Frisbee with his dog, but during this dream he has a nightmare that Groundskeeper Willie tries to kill him (using the styles of Freddy Krueger). He is slashed with a rake, and the scratches are still on his body after he wakes up. Many other kids at Springfield Elementary School also say they were terrorized by Groundskeeper Willie in their nightmares, and what he did actually affected them. Lisa was attacked with hedge clippers that chopped off two pieces of her hair, Nelson was ran over with a floor buffer and Sherri & Terri have been slashed across their chests like Bart. When the students take a test, Martin Prince finishes early falls asleep and is killed by Groundskeeper Willie, who cracks a joke about Martin's situation, similar to how Freddy taunts his victims. Martin Prince dies in class, but reanimates as an undead, psychopathic monster, only to be subdued before he can attack the frightened students. Bart and Lisa tell Marge about the monster. She says that Groundskeeper Willie was killed in a furnace explosion because Homer turned up the thermostat (even when there was a note saying "Do Not Touch") in the school on the thirteenth hour of the thirteenth day of the thirteenth month (the school misprinted their calendars; Homer is heard complaining about the "lousy Smarch weather"). He burned to death while the parents of the students looked on and did nothing while attending a meeting, and that he told the parents he would get his revenge by killing the children in their dreams (the one area where the parents cannot protect them). Bart decides that he's going to go to sleep and dream of fighting Groundskeeper Willie. Lisa is supposed to stay awake and wake him up if he seems to be in trouble. Bart appears in his dream and attempts to get Groundskeeper Willie, who can also transform into other things. Groundskeeper Willie turns into a bagpipe spider and is about to kill Bart, when Lisa enters, trying to wake him up. But since she's in the dream, that means she has also fallen asleep (she claimed that she was just resting her eyes). They're about to lose the battle when Maggie appears and uses her pacifier to clog the bagpipe chimney, causing Willie to explode. The next day, everything is back to normal, and Groundskeeper Willie doesn't have dream powers anymore, much to the children's relief.
When Homer desperately tries to avoid Patty and Selma during a visit, he hides behind a bookcase and stumbles upon a gateway to the third dimension. Homer explores the peculiar area while searching for a method to escape it when a bouncing cone stabs him in the butt. When he accidentally throws the cone in the center of the ground, point first, it starts to collapse into a sinkhole, taking Homer closer to it with increasing force, while Professor Frink outside explains to the others that Homer was in the third dimension. Chief Wiggum, enraged, shoots the wall that Homer passed into when entering the 3-D universe, but the bullets just get sucked into the black hole after Homer narrowly dodges them. Bart then ties a rope around his waist, and goes into the dimension to save Homer. However, the distance between them is too far for Bart to reach his Dad. Homer leaps for Bart, but falls short and into the sinkhole, yelling "Crap!" Bart ends up back in the house thanks to his safety rope after the third dimension imploded on itself. Bart tells the truth about what happened, much to Marge's dismay. Hoping to provide solace, Lovejoy says to her that Homer will end up in a better place. Homer lands in a dumpster in the "real" world, where he is met by shocked "real" people. He then sees a shop named "Erotic Cakes" and he forgets his troubles.
The first version of the episode was very long, so it featured a very short opening sequence and did not include several trademarks established in previous Treehouse of Horror episodes. "Homer3", pitched by executive producer The Late Bill Oakley, features three dimensional computer animation provided by Pacific Data Images (PDI). In the final scene of the episode, Homer is sent to the real world in the first ever live-action scene in The Simpsons. It was filmed on Ventura Boulevard in Studio City and directed by former executive producer David Mirkin. "Attack of the 50-Foot Eyesores" includes a cameo appearance from Paul Anka, who sings the song "Just Don't Look".
The episode received very positive reviews. It was described as "Complex, very assured and very clever, [...] The computer graphics are outstanding, and the final scene – as Homer enters our dimension – is one of the highlights of the entire series." Colin Jacobson of DVD Movie Guide said, "'Attack of the 50-Ft. Eyesores' stands as the strongest of the three segments. It doesn’t blast off the screen but it seems imaginative and fun. The Nightmare on Elm Street parody has its moments and comes across as generally entertaining. However, it lacks the bite the best pieces offer. Unfortunately, 'Homer3' gives us the weakest of the bunch. It tosses out a few funny bits, but it mostly feels like an excuse to feature some 3-D animation."