On Christmas Eve, Bruce Wayne learns that Commissioner Loeb is being held captive at Blackgate Prison by Black Mask and his crew. Without hesitation, Wayne suits up, and as Batman, he enters the damaged prison. After rescuing a tormented Warden Joseph, Batman learns that Loeb is being taken to the execution chamber. There, he finds that he's arrived too late, and Loeb is dead. Soon after, Batman follows Black Mask to the rooftops, where he is confronted by one of his hired assassins Killer Croc. During the ensuing battle, Black Mask escapes via helicopter. After Batman defeats Croc and interrogates him for information on his boss's whereabouts, he learns that Black Mask has placed a $50 million bounty on his head, which is being pursued by eight of the world's deadliest assassins. Batman then triangulates the Penguin's position aboard The Final Offer, believing he may know what's on Black Mask's agenda. After a brief altercation with the voltaic Electrocutioner, Batman finds the Penguin torturing a young Alberto Falcone. As Batman interrogates the Penguin and learns that Black Mask has been murdered at Lacey Towers, he is attacked by the veteran tactician Deathstroke. Following a tenuous battle with Slade, Batman leaves the ship victorious. Arriving at Lacey Towers, he performs a complete analysis of the crime scene, and learns that the victim was not Black Mask, but Roman Sionis's girlfriend Tiffany Ambrose and an unidentified man wearing a black mask. He also learns that the murder may have revolved around someone known as "The Joker".

Knowing he won't be able to identify one of the victims without access to the National Criminal Database, Batman infiltrates the GCPD to retrieve the information he requires. In the midst of his escape, Batman encounters the newly promoted Commissioner James Gordon, and the corrupt SWAT team who hope to eradicate Gordon and collect Black Mask's bounty money for themselves. Following a brief encounter with Gordon's daughter Barbara, Batman enters the sewers beneath the GCPD to secure permanent access to the database. While there, he finds Black Mask's crew planting explosives. After eliminating them and using the database, Batman uncovers the fact that Roman Sionis has been kidnapped by The Joker, who he believes intends to use Sionis to rob the Gotham Merchants Bank. At the bank, Batman encounters Black Mask who is revealed to be The Joker in disguise. This meaning that it was The Joker who had placed the bounty and contracted the assassins, having kidnapped and replaced Sionis days earlier, seizing his operation and forces. Batman then pursues The Joker to the Sionis Steelmill, rescuing Roman and defeating the poisonous contortionist Copperhead.

Batman then travels to the Royal Hotel, where he finds that Joker and his men have completely taken it over, murdering the staff, taking the guests hostage, and filling the building with explosives. Joker gathers the assassins together about their failure to kill Batman, and throws Electrocutioner out of a window to his death: Batman recovers his electric gloves. The assassins depart except for Bane who believes that Batman will come for the Joker. Batman works his way through the building, eventually encountering Joker and fighting Bane. Concerned for Batman's safety, Alfred calls the GCPD for help, who arrive and interrupt the fight. As Bane escapes by helicopter he fires a rocket at Joker. The concussive force sends Joker falling from the hotel, but Batman leaps after him, saving his life and leaving the Joker confused. The Joker is arrested and sent to Blackgate, where he is placed in the care of Dr. Harleen Quinzel. Talking to Quinzel, he explains that he now believes it was fate for him to meet Batman.

Batman returns to the Batcave, where Alfred implores him to abandon his crusade for the evening, fearing he faces certain death, but Batman refuses to listen. Batman tracks Bane to his temporary headquarters and finds notes that show that Bane knows Batman's secret identity as Bruce Wayne. Firefly launches an assault on the Pioneer Bridge, forcing him and Gordon to work together to overcome the assassin and his bombs. Afterwards, Batman learns that Bane has broken into the batcave and beaten Alfred nearly to death. Batman returns to find the Batcave in ruins, and Alfred dies. Using Electrocutioner's gloves, he shocks Alfred back to life. Meanwhile, the Joker launches another jailbreak at Blackgate, leading a full scale riot to take over the prison.

Finally accepting others help, Batman works with Gordon and the GCPD to retake the prison. The Joker forces Batman into a fight to the death with Bane, placing himself into an electric chair that will kill him if Batman does not kill Bane. Batman uses the Electrocutioner's gloves to shock Bane to death: convinced, the Joker continues with his escape intending to detonate his explosives placed around the city. Batman meanwhile shocks Bane back to life. Angry, Bane injects himself with a potent steroid which transforms him into a giant beast, but Batman manages to defeat him. Allied with Gordon, Batman fights his way through the prison to the chapel where the Joker awaits. Dismayed to learn that Batman saved Bane, the Joker taunts Batman into killing him, but Batman resists and subdues him.

In the aftermath, Gordon confesses to himself that he let Batman go because he believes he and Batman can give the city something to believe in. During the credits, in a radio interview, Quincy Sharp says he is going to lobby to reopen Arkham Asylum to house the worst criminals. After the credits, the imprisoned Deathstroke is approached by Amanda Waller with a job offer.