Harvey and Rachel are in court, prosecuting Salvatore Maroni (Eric Roberts), the suspected new head of Carmine Falcone’s mob. Their witness, a member of the mob who had previously identified Maroni, claims on the stand to be the head himself, in an attempt to protect Maroni. The witness pulls out a Chinese-made carbon-fiber pistol to shoot Harvey but he takes it away before he gets off a shot.

After the trial, Harvey has a meeting with Gordon, who is now head of the Major Crimes Unit. Harvey’s found the irradiated bills, and knows that Gordon’s working with Batman. Gordon claims otherwise. Harvey doesn’t like that Gordon has a special unit, with cops that Harvey once investigated at Internal Affairs, but he agrees to get Gordon warrants for the banks.

At Wayne Tower, Lucius Fox (Morgan Freeman) and the board are meeting with Lau (Chin Han) head of Lau Security Investments of China to form a joint partnership. Bruce is present, but has fallen asleep in the meeting. One member of the board, Mr. Reese (Joshua Harto), thinks Wayne’s presence is an embarrassment. Fox talks to Wayne and says that although the partnership was Wayne’s idea, Lau must have revenue that is off the books and might be illegal. Wayne calmly says to cancel the deal and Fox realizes that Wayne already knew. He just wanted a closer look at Lau’s books. He then asks for a new Batman suit that will let him turn his head.

Harvey and Rachel are at a fancy restaurant that it took Harvey three weeks to get reservations for. Bruce arrives with a member of the Russian ballet, and suggests they put two tables together. Harvey doesn’t think they’ll let them, but Bruce says they should, because he owns the restaurant. They discuss Batman, and Harvey says he thinks Batman wants someone legitimate to take up his mantle. Bruce offers to throw Harvey a fundraiser.

The mob has a videoconference with Lau to discuss the money that the Joker stole: a “small amount” of 68 million, and that they’ve discovered the marked bills planted by the police. Lau reveals the police plan to raid the suspected banks, and says that he’s already moved the money to a secret location, leaving ONLY the marked bills behind so Gordon has nothing to go on, and since he’s in Hong Kong, Harvey Dent can’t go after him. Just then the Joker shows up. He knows they are afraid of Batman, and reveals that Batman can go after Lau. He offers to kill Batman for half of their money. One of the mob bosses puts out a reward for the Joker of $500,000 dead or 1 million alive.

Batman, Harvey and Gordon meet at the bat signal. Harvey and Gordon blame each other’s office for the leak. Batman offers to get Lau back from Hong Kong. Bruce and Fox discuss skydiving into Hong Kong and skyhooking out. Fox shows him the new batsuit, which has more flexibility, but isn’t as resistant to bullets and knives. Bruce and Alfred leave by yacht, with the entire Russian ballet as an alibi.

Some men claim to have killed the Joker and bring him to the mob, but it turns out to be a trap and the Joker is alive. He tells a story of how he got his scars, and kills the mob boss who put out the hit. He gives the other three mob men an opportunity to fight to the death for a spot on his team.

Fox arrives in Hong Kong to meet Lau. Fox is asked to check in his cell at the front desk of Lau’s building. Meeting with Fox, another cell rings in Fox’s pocket, and Fox tells Lau that due to the police charges, they’ll have to put the partnership on hold. As he leaves, Fox leaves the first cell behind. Outside, he gives the second to Bruce, and shows it a sonar mapping system it is equipped with. That night, the first cell disrupts the power in Lau’s building. Batman gets into the building and kidnaps Lau by skyhooking out. He leaves Lau tied up in Gotham outside the police department.

Rachel makes a deal with Lau that he will give up all of his mob contacts in exchange for immunity, protection and a chartered flight back to Hong Kong. Lau’s information allows Gordon to arrest the entire mob for extortion, racketeering, fraud, conspiracy to commit murder and obstruction of justice. The Mayor Garcia (Nestor Carbonell) doesn’t like it, saying they’ll all get out on appeal, but Harvey says only the head men will be able to afford bail, so they will have months of clean streets. As the mayor warns Harvey that everyone who has something to lose will come after him, a dead, imposter Batman, painted with clown makeup, drops in front of the window, hanging from a noose.

Bruce and Alfred watch the news as it plays a tape from the Joker demanding that Batman turn himself in or people will die every night.

That night, the judge that convicted all the mob members and Police Commissioner Loeb (Colin McFarlane) are killed, and at the fundraiser for Harvey in Bruce’s penthouse, shortly after Harvey proposes to Rachel, the Joker shows up looking for Harvey Dent. However, Bruce hides Harvey and gets into costume as Batman, as Rachel stands up to the Joker. The Joker tells another story of how he got his scars, different from the first. Batman shows up to stop the Joker, who throws Rachel out of a window and Batman jumps out after her and saves her.

The police receive a tip that Harvey Dent will be found in an apartment. At the apartment, Gordon finds two dead Gotham police officers, with the last names of Harvey and Dent. Batman shows up, finds a fragmented bullet lodged in a brick wall and extracts that part of the wall. Meanwhile, the Joker has left a clue for his next target: Mayor Garcia. Back at the temporary batcave, Bruce and Alfred experiment to reconstruct the bullet and find a fingerprint on it. Meanwhile, at Wayne Enterprises, Reese has figured out that Bruce Wayne is Batman and has proof. He tries to blackmail Wayne through Fox, until Fox points out what a bad plan it is to try to blackmail someone who spends his nights beating up mobsters with his bare hands. Fox helps Bruce and Alfred reconstruct the bullet, and asks Bruce about something Reese said about R&D being reassigned to a mysterious government telecommunications project. Fox says he didn’t know they had any government contracts and Bruce says he’s playing it close to the chest.

A parade is being held for the funeral of Commissioner Loeb. Mayor Garcia is part of the parade. Alfred and Gordon find a possible match for the fingerprint, with an address along the parade route. Bruce takes his motorcycle to the address, where he finds a group of men tied up with their mouths taped. He untapes one, who says that they are police whose gun and uniforms were stolen. The mayor is giving a speech, and when he finishes, the honor guard begins firing a salute. The windowshade in the apartment Bruce is in is rigged with a timer, which goes off during the salute as a distraction for the police snipers. Then members of the honor guard, who are actually the Joker’s men, turn to take a shot at the mayor, but Gordon jumps in front of him and takes the bullet. The fake police take off running, but one is captured. Harvey tries to question him and sees that he is wearing a nametag reading “Rachel Dawes.” Gordon’s family is told that he’s been killed. His wife (Melinda McGraw) blames Batman.

Batman goes to a dance club to find Maroni, while Harvey calls Rachel and warns her. She says she can go to Bruce Wayne’s penthouse for safety. Batman aggressively questions Maroni for information about the Joker, who says that no one will risk crossing the Joker. Meanwhile, Harvey plays a form of Russian roulette with the fake cop for information, holding the gun to his head and flipping his lucky coin to decide whether or not to pull the trigger. Batman shows up to stop him, because if anyone found out what Harvey was doing, everything he’d done would be turned back. Batman tells Harvey to hold a press conference in the morning, where Batman will turn himself in, so no one else will die because of him. Harvey says Batman can’t give in.

Bruce comes home to his penthouse to find Rachel there. She says Harvey called her and said Batman is going to turn himself in. Bruce says he has no choice. Rachel doubts that it would stop the Joker, but Bruce says he has enough blood in his hands. He asks her if she meant it when she said they could be together if he was no longer Batman. She says yes, but if he turns himself in they still won’t be able to be together.

Bruce has Alfred burn all records of his being Batman, then goes to the press conference. Harvey tries to defend Batman, saying that he shouldn’t have to turn himself in, but the public and police don’t agree, so Harvey says that HE is the Batman and has himself arrested. Bruce doesn’t interfere.

Rachel doesn’t understand why Bruce won’t come forward to exonerate Harvey, and gives Alfred an unsealed note to give to Bruce. As Harvey is taken away, he and Rachel kiss and he tosses her his lucky coin, which it turns out has heads on both sides.

As Harvey is moved to jail in an armored truck, a burning fire truck forces the police convoy to go underground, where they are attacked by large trucks driven by the Joker’s men. Batman intercepts them in the Tumbler, but the Joker manages to shoot the Tumbler with a bazooka, seriously damaging it.

Batman activates an eject sequence that allows him to continue on a motorcycle consisting of two of the Tumbler’s wheels while the rest of the Tumbler self-destructs.

The armored police truck carrying Harvey has returned to the surface, still being pursued by the Joker driving an 18-wheeler. Batman eventually catches up and plays chicken with the Joker, grabbing onto his truck with cables and wrapping them around light poles, causing the Joker’s truck to flip end-over-end.

The driver of the armored police truck, who is in full SWAT gear, including mask, stops, despite protests by his partner. The Joker gets out of his wrecked truck and raced down Batman on his bike, challenging him to hit him. Batman evades the Joker and slides into the wrecked truck. The Joker goes after the knocked-out Batman but is ambushed by the driver of the armored truck, who is revealed to be Gordon. The Joker is arrested and Harvey is released from the armored police truck, surprised to see Gordon.

In jail, Gordon admits that he faked his death to protect his family. The Joker has no matches on prints, DNA or dental records and no ID.

Eventually, he tells Batman that Rachel’s been kidnapped too, and tells Batman where each of them are. Batman goes after Rachel while Gordon and his men go after Harvey. Harvey and Rachel are each tied up with a bomb, drums of gasoline, and a speakerphone so they can talk to the other. Meanwhile, the Joker demands his one phone call, and one of his men in a cell complains of stomach pain. The police find he has a large scar across his stomach. The Joker manages to get his phone call, which he uses to set off a bomb inside the other prisoner and escape with Lao.

Batman arrives at his location to find Harvey instead of Rachel. Batman barely gets Harvey out, but not fast enough to keep one side of his face from being burned, while Gordon is too late to save Rachel, who says yes to Harvey’s proposal just before being killed in the explosion.

Alfred reads the note from Rachel, where she tells Bruce that she plans to marry Harvey and that they will only be friends. Alfred is about to give it to Bruce, when Bruce says that he believed Rachel was going to wait for him. Alfred decided not to give him the note and reveal the truth.

In the hospital, Harvey wakes up to find that his coin has been returned to him (by Batman), with one side now singed black. Meanwhile, Reese has gone to the news to reveal the true identity of Batman.

Gordon goes to see Harvey, who is refusing skin grafts for the burned side of his face. Harvey asks Gordon what name the police had for him when he was at Internal Affairs. Gordon says it was Two Face, and Harvey reveals the burned side of his face. Gordon asks which of his men turned on him, but Harvey refuses to say. As Gordon leaves, Maroni is waiting for him and tells him where the Joker will be.

The Joker is in a warehouse with the huge pile of mob money and Lao tied up on top of it. The Joker soaks the money in gasoline and sets it on fire. Reese is on TV and is about to reveal Batman’s identity, when the Joker calls the TV station and says he’s had a change of heart. He says if Coleman Reese isn’t dead in an hour, he’ll destroy a hospital. Gordon orders the hospitals evacuated and goes to pick up Reese, while Bruce takes his Lamborghini to do what he can. Meanwhile, Alfred researches what police have family in the hospital, and sends a name to Gordon. The just happens to be the name of an officer accompanying him with Reese. The hospital, except for Harvey who’s under guard, has been evacuated, but the Joker, dressed as a nurse, takes out the guard and visits Harvey. He gives Harvey and gun and convinces him to induce chaos because its fair. Harvey flips his coin, which now has two distinct sides, to decide whether or not to kill the Joker. He lets him live. Meanwhile, Bruce uses his car to protect the police vehicle carrying Reese from being intentionally hit by a truck, playing dumb and saying he was trying to make a light. The Joker blows up Gotham General Hospital and drives off with a busload of 50 evacuated people.

The Joker releases a video that gives everyone in the city until nightfall to leave or play by his rules, and threatens the bridges and tunnels. Harvey goes after Wuertz (Ron Dean), the cop who turned on him, and asks who took Rachel. He says he doesn’t know, so Harvey flips his coin and according to the result, kills him. Batman shows Fox what his secret project was: a system that applies Fox’s sonar to every cellphone in Gotham, turning it into a microphone and letting him hear what is happening throughout the city. He enlists Fox to help him find the Joker, because he designed is so only Fox can use it. Fox says he’ll help this one time, but after this he’ll resign, because he can’t stay if the system does. Batman tells him when he’s done to type in his name.

With the bridges and tunnels threatened, the roads out of town are gridlocked, leaving only the ferries. Gordon tells the mayor he has to use a ferry to get the prisoners out of Gotham, despite all the civilians waiting, because whatever the Joker’s plans are, the prisoners are probably part of it.

Maroni finds Harvey waiting in his car. Harvey asks him who picked up Rachel, and he says it was Gordon’s partner Ramirez (Monique Gabriella Curnen). Harvey flips his coin, and Maroni lucks out, but Harvey flips it again and Maroni’s driver isn’t so lucky.

Two ferries depart Gotham, one with civilians and one with prisoners. Both lose power, and when the crew investigates they each find the engine room full of rigged barrels of diesel and ammonium nitrate and a box with a remote detonator. The Joker comes on the intercom and tells them that they’ll blow at midnight, but they each have the detonator for the other boat and if they blow up the others they’ll be spared. Batman and Fox overhear and track down the Joker to a skyscraper under construction and Batman tells Gordon where he is, while the people on both ferries discuss what to do, and Harvey has Ramirez set up Gordon’s family to be captured.