ASCII-Art Zombie Invasion Simulation
Kotlin, 283 218 bytes

Unnamed lambda (with a nested function, heh).

Golfed

{i:String,x:Int,y:Int-&gt;val m=i.lines().map{it.toCharArray()};fun v(x:Int,y:Int){try{if(m[y][x]=='#'){m[y][x]='%';for(c in-1..1)for(d in-1..1)if(!(c==0&amp;&amp;d==0))v(x+c,y+d)}}catch(e:Exception){}};v(x, y);m.map(::println)}


Ungolfed

fun zombies(input: String, startX: Int, startY: Int) {
    val m = input.lines().map(String::toCharArray)      // build game map
    fun invade(x: Int, y: Int) {                        // nested functions, woo!
        try {
            if (m[y][x] == '#') {                       // if land
                m[y][x] = '%'                           // mark as invaded
                for (dx in -1..1) {                      // generate neighbour tiles
                    for (dy in -1..1) {
                        if (!(dx == 0 &amp;&amp; dy == 0)) {
                            invade(x + dx, y + dy)        // attempt to invade neighbours
                        }
                    }
                }
            }
        } catch(e: Exception) {}                        // catches ArrayIndexOutOfBounds
    }

    invade(startX, startY)                              // start the invasion
    m.map(::println)                                    // print final state
}


Saved quite a few bytes by switching to a recursive solution.