Howling III (also known as Howling III: The Marsupials and The Marsupials: The Howling III) is a 1987 Australian horror sequel to The Howling, directed by Philippe Mora and filmed on location in and around Sydney, Australia. Starring Barry Otto, Imogen Annesley and Max Fairchild, Howling III is the only PG-13 rated entry in the Howling film series and also the last film in the series to be released theatrically. In this sequel, werewolves have evolved, with females having marsupial-like pouches to nurse their young. Scientists attempt to study them, while soldiers try to track and kill them in the Australian Outback.
Although Gary Brandner, author of the Howling novel series, approved the director's purchase of the rights to the name The Howling and the screen credits claim that it is based on Brandner's novel The Howling III: Echoes, the novel is set in the United States and has a different story than the film, with only slight similarities in terms of plot and a sympathetic view of werewolves. This aspect would be revisited in Howling VI: The Freaks.
Harry Beckmeyer, an Australian anthropologist, obtains film footage from 1905 which shows Australian Aborigines ceremonially sacrificing a wolf-like creature. Alarmed by the reports of a werewolf killing a man in Siberia, Beckmeyer tries to warn the U.S. president about widespread werewolf attacks, but the president is dismissive.
Jerboa, a young Australian werewolf, flees her sexually abusive stepfather, Thylo. After spending the night on a park bench near the Sydney Opera House, she is spotted by a young American, Donny Martin, who offers her a role in a horror film, Shape Shifters Part 8. Jack Citron, the film's director, praises her natural talent and hires her immediately.
After Jerboa and Donny attend a film which depicts a werewolf transforming, she insists the scene is inaccurate and admits she is a werewolf to an unbelieving Donny. After they have sex, Donny notices that Jerboa's lower abdomen is covered in downy white fur and a large scar.
At the wrap party for the film, Jerboa is exposed to strobe lights and starts transforming. She flees the party and is hit by a car. At the hospital, doctors find she has a marsupial-like pouch and striped fur on her back like a thylacine. They also discover that Jerboa is pregnant and question Donny about her unusual anatomy.
Beckmeyer's father disappears in the Outback shortly after recording a film of tribal villagers killing a werewolf. Three of Jerboa's sisters track her to Sydney and take her back to the pack's hidden werewolf town, Flow (wolf spelled backwards).
Beckmeyer and his colleague Professor Sharp spend the evening watching a visiting ballet troupe practice. They witness the prima ballerina, the Russian Olga Gorki, transform into a werewolf—to the horror of her troupe. After being captured and taken to a laboratory, she quickly escapes. She makes her way to Flow, where the pack wants her to be Thylo's mate.
Jerboa gives birth to a baby werewolf which crawls into her pouch. Donny informs Beckmeyer that his girlfriend is from Flow and they attempt to find her. Jerboa smells Donny nearby and meets him at night. She shows him their baby boy and tells him about the impending danger; they flee to the hills.
The next morning, a government task force captures the werewolf pack. Beckmeyer convinces Olga to allow scientists to study her and Thylo. After Thylo is tortured with strobe lights to make him transform, Beckmeyer frees him and Olga. The trio escape into the Outback and find Kendi, Donny, Jerboa and the baby.
Kendi summons the spirit of a phantom wolf which massacres hunters pursuing the group. Kendi is cremated, but the smoke alerts soldiers still in pursuit of the pack. Kendi's skeleton attacks the soldiers before being destroyed by a soldier's machine gun. At night, Thylo also summons the spirit and is transformed into a huge wolf. He attacks the remaining soldiers before being killed by a bazooka blast that destroys the rest of the encampment.
Olga and Beckmeyer fall in love and hide with Jerboa and Donny at an idyllic riverside camp. Eventually, Jerboa and Donny leave, assuming new identities; the Beckmeyers remain behind to raise their daughter and newborn son. Sharp locates Harry and informs him that all lycanthropes have been given amnesty due to the crimes committed against them. The Beckmeyers move back to the city.
While teaching a class in Los Angeles, Beckmeyer is approached by a young man who introduces himself as Zack, Jerboa and Donny's son. Zack informs Beckmeyer that his parents are living in Los Angeles under new identities: Jerboa is now the famous actress "Loretta Carson" and Donny is the famous director "Sully Spellingberg".
That night, Olga and Beckmeyer watch Jerboa win a best actress award on a television show hosted by Dame Edna Everage. As Jerboa accepts the award, the flashing cameras and stage lights cause her to change into a werewolf. Olga also transforms, to her husband's dismay. Jerboa goes on the attack as her sisters howl in glee; Sharp smiles deviously in his living room.
The final shot is of a thylacine, also known as a Tasmanian wolf or a Tasmanian tiger, a carnivorous dog-like marsupial which was hunted to extinction by Australian farmers to protect their sheep.