With the fall out of War Games, the Black Mask has become Gotham's one and only crime lord, running Gotham City with an iron grip. Batman is more alone than ever after the apparent death of Stephanie Brown, and the realization that his friends and teammates wiped his memories years ago after Sue Dibny's rape, in the Identity Crisis storyline. With Black Mask rising to power, and Batman struggling to protect Gotham, a new vigilante comes on to the scene, calling himself the Red Hood, a monicker once used by the Joker. Red Hood meets with many of Black Masks' drug lords and informs them he will be taking over the trade, offering them a better deal, but demanding they don't sell to children. To show them that he's serious, he throws them a duffle bag full of the severed heads of their lieutenants, and leaves.
Batman eventually comes across the Red Hood when he and Nightwing find him intercepting a package for Black Mask which contains Amazo. After fighting off Amazo, Batman gives chase to Red Hood but can't catch him. Analyzing Red Hood's agility and tactics, Batman realizes he's been trained by someone, he's good.
Black Mask becomes more and more frustrated with Red Hood knocking over his operations, and once Red Hood intercepts a shipment of kryptonite, Black Mask hires Mr. Freeze in order to kill him. Batman shows up to the fight, as he had been tracking both Red Hood's and Black Masks' actions. While fighting off Freeze, Red Hood gives subtle hints as to who he really is, causing Batman to question one of the truest things he believes in, logic.
With an haunted mind, Batman departs Gotham City for a short time to speak with his allies and "friends." He speaks to Superman about coming back to life, but Superman reminds Batman that he never truly died. Next he speaks to Green Arrow, who was one of the members of the JLA that mind-wiped him, about the same subject. Their meeting is tense, with Batman letting on to the fact that he knows what was done to him. Finally, he meets with Zatanna, the woman who mind wiped him, at one of Ra's al Ghul's closed lazarus pits. Zatanna reminds Batman that he had closed all of Ra's' pits, and questions why he called on her. Batman simply responds "I needed someone I could trust... But I had to settle for you" before he leaves.
Elsewhere, Joker, beaten, and driven out of Gotham City, sits within an abandoned carnival where he is approached by a figure within the shadows. After giving a half hearted threat of "Don't you know who I am? I'll kill you" to his visitor, Joker looks up to see a crowbar coming at his face. Red Hood mercilessly beats Joker with the crowbar, very similarly to the way Joker beat the second Robin, Jason Todd, with a crowbar, prior to setting off a bomb which killed him. When Red Hood stops, he takes off his mask, and sure enough, he's revealed to be Jason Todd, back from the dead.
With his back against the wall more than ever, Black Mask agrees to join the Society, a group of super-villains banding together prior to Infinite Crisis on the condition that Deathstroke sends some operatives to kill Red Hood once and for all. Deathstroke sends (to Black Masks' displeasure) Captain Nazi, Hyena, and Count Vertigo to deal with Red Hood. While the trio gets the jump on Red Hood, Batman eventually comes to fight with him, fending off the Society's assassins. The fight ends with Red Hood killing Captain Nazi to Batman's shock. Red Hood informs Batman that he is what the city needs, and he'll do what Batman won't.
During their next meeting, Batman chases Red Hood through out the city, determined to end his reign of chaos once and for all. In a brutal fist to fist fight, Red Hood manages to unmask Batman. Figuring he'd make it "fair" he decides to reveal himself as well, and reveals to Bruce for the first time that he is actually Jason Todd. Bruce refuses to believe what he's seeing, but Jason offers up a blood and tissue sample, to satisfy Bruce's need for logic, and assures his former mentor that it is indeed him, and he is alive. Bruce returns to the Batcave where he confirms, Red Hood is the one and only Jason Todd.
Red Hood eventually meets with Black Mask in order to work out a truce. One of the conditions is that Black Mask must masacre all of his top men, which he does. When Red Hood arrives, he doesn't give Black Mask the deal he's looking for, and the two start to fight. With Batman rushing to the scene, he comes to find Black Mask stabbing Red Hood in the heart. Batman is afraid that once again, he has failed to save Jason's life, but it turns out that the man Black Mask killed was a body double, and Jason gives Batman a hint as to where he actually is. Crime alley, where Batman was born.
Bruce meets Jason on the rooftops and quickly gives chase to him. Elsewhere, Deathstroke, and the Society drop Chemo onto Blüdhaven, Gotham's sister city, destroying it. Batman witnesses the blast and immediately becomes distracted, worrying about Nightwing. Jason laughs at the irony of one Robin coming back from the dead and the other dying, but prevents Bruce from leaving, demanding he stay and finish their fight. Bruce obliges, and brutally beats the living hell out of Jason.
The fight ends up in an abandoned apartment. Bruce tries to talk Jason down, but Jason tells him he's not mad at Bruce for not being able to save him in time, what he's mad at is that the Joker is still alive. Jason kicks open a closet to reveal the Joker tied up, and bloodied. Joker laughs at the situation, commending Jason on coming back all the way from the dead in order to set up the "family reunion." Jason throws Bruce a gun and gives him an ultimatum, kill Joker now, or he will. Jason continues to say that the only way to stop him from killing the Joker would be for Bruce to kill him first.
Bruce stares at the gun, and tells Jason that the reason he never killed the Joker before is that it would be too easy. There's not a day where he doesn't think about killing him with his own bare hands, but if he was ever to cross that line, there would be no going back. Bruce drops the gun and begins to walk away with Jason screaming at him. Jason points the gun towards Bruce and fires. Bruce avoids the bullet, and throws a batarang into the barrel before Jason can fire another round, causing it to explode in his hand when he does. Thinking it's over, Bruce is shocked to find that Jason sets off a timer for the building to explode. He tries to save Jason, but Joker tackles him, hysterically laughing, claiming he's the only one who gets what he wants. Bruce punches Joker off him, and in the last second is able to save Jason, and shield himself from the blast.
When Bruce comes too in the wreckages, he finds Joker, barely alive, and laughing. Jason is nowhere to be found. All Bruce can come to do is yell out his name.
It is later revealed that due to the events in Infinite Crisis, Superboy Prime punches the walls of reality, which "corrects" mistakes that were never supposed to happen, in the past, present, and future. Jason Todd's death was one of these mistakes. Months after his death, he was brought back to life, and forced to dig himself out of his own coffin. Heavily brain damaged, he was brought to a hospital where he eventually escaped and lived on the streets for some time until Talia al'Ghul found him. Talia nursed Jason back to health, and despite her father's wishes, threw him in a lazarus pit, causing his memories to come back. Jason would spend the next few years training, until he teams up with Hush to confront Bruce for the first time, but leads Bruce to believe that it was Clayface mocking him. After that confrontation, Jason decides to take up the former alias of the Joker, the man who killed him, and come back to Gotham as the Red Hood.