The movie begins with the Jokerz infiltrating a facility to get a component for a high-tech device. Just then, Terry arrives and tries to beat them, but they manage to escape with the component. However, while chasing them, Terry has stopped them from getting the component, but they escaped.
In the Batcave, an elderly Bruce is practicing throwing Batarangs at the cardboards of his enemies. Just then, Terry arrives and plans to go to a nightclub. Bruce suggests that he needs some sleep, but Terry refuses, saying that he doesn't need some sleep like Bruce is.
However, Terry begins to feel tired while inside the nightclub.
Meanwhile, in an abandoned candy factory, the Jokerz give a chip to the mysterious figure. However, he is not happy that he got that and calls them a disgrace to the name Joker. When he is saying about in his day, Bonk is getting tired of that concept and thinks that his leader is a fake, but he isn't bothered by it. Bonk tells the gang that their leader has hired them, but gives them no money and won't tell them about his plans. He asks the figure that he wants out which causes the latter to point his gun at Bonk. He tells him that he is just kidding. Just then, the figure fires his gun, but it is only "Bang!" flag, stating that he is also kidding; however, he shoots the flag onto Bonk's chest, killing him.
The mysterious figure is revealed to be Joker and throws his gun, saying that is what he does in his day. He finds Gotham becoming new and a new Batman, and now that he's back, he's planning to give this town a wedgie again. Joker asks his gang if they were with him and they reply in a nervous manner. He begins to ask each member if they were with him and they reply that they're with him. Joker asks Bonk, but he's dead and orders Dee Dee to throw his body. He decided to forget about the mishap and start all over.
Joker orders Ghoul to find a component for a device and the former finds one place. However, the latter states that the security is tight, but Joker asks them to think about the fun.
Bruce and Terry arrive in a party at Wayne Industries. The former is about to make a speech when the lights go out. Meanwhile, Chucko and Ghoul are trying to steal a component for a device. At the same time, Bruce gets into a fight with Woof. Despite being an old man, he can still kick his butt. When Terry asks if he's gonna be okay, Bruce replies to go to work.
Just then, Dee Dee arrive and attacks Bruce. A purple spotlight appears, revealing Joker. He tells Gotham that he's back and uses his trademark laugh. Bruce is shocked by this, but Joker tells him that this is no trick. Just then, Terry arrives and Joker orders Woof to get him. Joker asks Chucko and Ghoul if they got the device which they did. He summons a flying vehicle and salutes Bruce with a goodbye.
Terry tries to get him, but Joker destroys a portion of the balcony, sending two people about to fall to their deaths. He asks him what is his decision and Terry leaves. Joker smiles sinisterly as he knows what he decided. Terry saves the two people from falling.
After the incident, Terry knows what Bruce is thinking that he just let Joker got away to save the people. The latter replies that he did the right thing, and the former asks about Joker. However, Bruce doesn't answer and orders Terry to just drive.
In the next morning, Terry goes to Commissioner Barbara Gordon to ask her questions about Joker. Afterwards, a man named Tim Drake goes to her.
Meanwhile, Bruce is checking a profile on his archenemy, and checks if the voices match in order to make sure there is no impostor impersonating Joker. Terry arrives and knows all of the original Batman's enemies, but didn't mention about Joker. When he asks if the latter is the biggest one, Bruce replies that this isn't a popularity contest and that Joker is a psychopath, a monster. Terry asks that how could Joker be still around, and Bruce replies that he died years ago and he saw it. Just then, Bruce orders Terry to give him the Batsuit so that he will not be endangered. The latter throws it to him in anger.
In the next morning, Matt is angered with Terry and calls his mother about him. She replies that Terry is his big brother and the main reason Matt doesn't see him much is because of his work with Bruce. Terry says that he doesn't work with him anymore and his mother is happy about having him home, much to Matt's dismay. Terry plays a prank on him by flicking a piece of cereal onto his face.
At the night, Terry is in a nightclub trying to dance with Dana, but she's attacked by two twin girls. At the same time, Bruce is working at the Batcave creating an antidote for Joker's toxin. Just then, his pet dog, Ace, is attacked and Joker's gas is spreading in the cave. Bruce tries to get to the antidote, but drops it. Joker arrives and pins him to a chair, saying "Hello, Batman".
Meanwhile, Terry is attacked by the Jokerz in the nightclub. While fighting them, Dana is injured. After defeating the gang, Terry tries to call Bruce, but nothing. He goes to his manor to find it and the Batcave a mess. Terry finds Bruce almost being infected by Joker's toxin, and the latter asks him to be injected with the antidote.
In the next morning, Bruce is recovering from the toxin. Barbara has decided to tell Terry the story of what happened to Joker.
It is revealed that in one night, Robin is abducted by Joker and his love interest, Harley Quinn. Batman and Batgirl go to Arkham Asylum to confront them. When the former tries to get to Robin, Harley traps him with a ribbon. Joker has revealed that he made Robin into a Joker-like child. Angered, Batman breaks free and throws a Batarang at Joker, but he dodges it. Batman chases Joker around while Batgirl fights with Harley.
The latter tries to kill Batgirl with a bazooka, but she is hit. Batgirl tries to save Harley, but she falls to her presumable death. Meanwhile, Joker reveals to Batman on how he turned Robin to the way he is and now knows that he is Bruce Wayne. He taunts Batman that he is little boy in a playsuit crying for his parents, and laughs. Batman begins to beat him and plans to kill him, but Joker taunts Batman he should have done that years ago and slashes him in the chest and stabs his leg with a knife. Joker tells Batman that he has lost and the last sound he'll hear will be their laughter, and orders Robin to kill him with a gun. However, Robin shoots Joker instead and the latter remarks that this is not funny before dying.
Batgirl arrives to find Robin begin crying and tries to comfort him.
Ever since the incident, Batman has ordered Tim and Barbara to give up their alter egos so that he will not endanger them. When Terry asks Barbara about Harley, she replies that she never found her body.
Terry goes to Tim to get some answers.
In the night, Price is attacked by the Jokerz, the gang whom he hires to beat Bruce. Terry arrives to save him, but turns him over to the police after revealing evidence that he used the Jokerz for his plot.
While Terry is researching in the Batcave, Bruce comes down, having finally recovered. He reveals about the components for a device.
Terry goes to Tim to tell him that he knows about his connection to the Joker. However, he doesn't seem to hear him, and when Terry touches him, it is just a hologram and is led into a trap. Just then, Joker appears from a screen and reveals on how Tim is on his employ and reveals a device that zaps lasers for his plot. Terry has managed to escape the trap.
He plans to go to Joker's hideout, an abandoned candy factory. Joker sends the laser on, but he turns it off when he feels strange. The Jokerz try to attack Terry, but to no avail.
Inside the factory, Terry finds Tim there and knows that the latter is working for Joker. Just then, Tim traps Terry and begins laughing. Just then, he transforms into Joker. It is revealed that while Robin is in captivity, Joker uses a microchip with his DNA on Robin which explains of the transformation. However, he has limited time being in Tim's body as he is not aware of what Joker does. When his family misses him, Joker would use Tim's voice that he is working late. Soon, he will be strong to be in taking over Tim's body permanently.
Joker plans to hit on three spots: the hospital where Dana, the McGinnis residence when Matt and Mary McGinnis, and Wayne Manor where Bruce is. When he asks Terry if he has any last words, the latter sics Ace on Joker. However, he uses an electric buzzer on him, and just as he about to kill him, Terry stops him, sending his buzzer to the device that causes the laser to go to the factory.
Terry tries to turn Joker in, but the latter beats him up easily. He tells Terry that he is out of his lead because he know every trick that the original Batman has. When Terry states that he doesn't know a thing about him, Joker taunts him that he's just an errand boy taking orders from a senile old man.
Terry locks up the doors and fights Joker; however, he is beaten easily and asks Bruce for advice. He replies to block his talking. Terry tries to use his talking on the Joker, but it fails. Joker traps Terry with a table and orders him to laugh. The latter laughs and destroys the microchip, killing Joker again. Terry rescues Tim as they escape from the factory.
In the city jail, Dee Dee is bailed out by their grandmother who is disappointed with them. Meanwhile, in the next morning, Tim is taken to the hospital with Terry and Barbara visiting. Just then, Bruce arrives and tells Terry that it is not being Batman that makes him a worthy person, but the other way around. He goes to Tim and Barbara afterwards.
In the night, Terry dons the Batsuit and flies around Gotham, understanding his responsibilities as the new Batman.