The movie starts off with the Joker beating Jason Todd, the second Robin to death with a crowbar in an abandoned building. Ra's al Ghul, realizes his mistake with allying with the Clown Prince and learns that Batman won't make it in time to save Jason Todd. Batman arrives late to rescue his wounded partner and the building explodes just as Batman arrives. Jason's body is found in the rubble caused by the explosion Joker had previously set up.
Five years later in Gotham City, a new criminal vigilante Red Hood has assembled a meeting with the top earning thugs and drug dealers in Gotham. The masked man then reveals that he has killed all of their second hand men and officially names himself boss and tells them to give him forty percent of their earnings and warns not to sell drugs or go anywhere near children, or else. Elsewhere, Batman and Dick Grayson are then seen fighting an Amazo (android) at a shipping dock near the river. Once the robot is defeated and the three thugs who were there are tied up, Batman begins questioning them and learns that they are working for the Red Hood. Suddenly, a sniper, revealed to be The Red Hood shoots and kills all three thugs. Batman begins to chase Hood throughout the city, and Bruce is lead to Ace Chemicals, the birthplace of the Joker. Red Hood sets off an explosion, destroying the facility with Batman barely escaping with his life. Bruce and Nightwing rendezvous in the Batcave and Batman tells Nightwing since The Red Hood has appeared, trafficking has gone up but crime has remarkably gone down.
Batman and Nightwing proceed to Arkham Asylum and question Joker about this new Red Hood, and whether or not he is involved. Joker taunts and torments Batman about the death of Jason Todd, and denies any involvement. At Black Mask's headquarters, Sionis is in a fit because his "Amazo" was destroyed. Black promptly puts a hit on Red Hood to his men. A new recruit starts to talk about the next shipment coming in and both Batman and Red Hood have bugged the place, listening in on the conversation. It cuts to a scene with a helicopter, and Red Hood shows up and hijacks the helicopter, only to be stopped by Batman and Nightwing. Red Hood runs and Batman chases him, leaving Nightwing to clean up the mess the duo left behind. Once Nightwing is finished he joins up with Batman and the chase leads to a blimp and rooftops. The is extended leading Nightwing to saying how good Red Hood is by being able to evade Batman at every turn. The chase leads to a train station above ground and a explosion goes off leaving Batman and Nightwing temporarily unstable and lets Red Hood escape. After reviewing the audio footage from the battle, Bruce realizes that Red Hood knows his secret identity. Dick returns home after having his injured arm bandaged by Alfred.
Bruce keeps watching the footage, making him wonder if Jason is behind the helmet. This leads to a flashback of when the duo were at their best and worst fighting The Riddler and some average thugs. The scene cuts to a shoot out on one of Red Hoods protected areas by Black Masks henchmen with a intrigued Red Hood watching form afar. It then cuts to another scene where one out of eight of the crime bosses that is following The Red Hood is being beaten and about to be burned when... The Red Hood jumps in to save the day, but little did Red Hood know that it was a trap and a group called, "The Fearsome Hand of Four" attacks Hood. Hood soon gets beaten but goes on to say he's stalling and Batman shows up and the duo are reunited and start to fight the four, when one of the four gets the upper hand on Hood, he zaps him in the head and kills him with no regard life which causes Batman to look down on Hood and they have an argument in which Hood then leaves.
Back at the Headquarters of Black Mask, Mask is given news that his shipment has once again been taken away by Hood and gets into a rage when a small red dot his seen on his neck and then to his forehead, form afar a Red Hood waves and shoots a rocket into Masks room but a reluctant Mask survives and is forced to call... for a helping hand.... Joker is set free by Mask and was given the task of killing The Red Hood. Back at Wayne manor Bruce digs up Jason;s grave site and finds that the body is still there but not a real one, Bruce gets enraged that he was fooled and bursts out of his estate to the source of where this all started. At Ra's al Ghul s' mansion Batman bursts into the window from where Ra's is standing and questions him about Jason in which where Ra's confesses and tells him all he needs to know. On his way back to Gotham Batman finds that Joker has abducted all eight of Red Hoods crime bosses including Black Mask and his assistant on the bridge, Joker starts to pour gas on the hostages in a large truck container and as Joker is trying to light the event The Red Hood appears and the two have a conversation in which Joker ends by finally being able to start his lighter and starts to burn the hostages alive... then out of nowhere Batman swoops in and splashes what seems to be foam or something like it to stop the fire and tries to take Joker out with him but a sharp Hood grabs on to Joker and cuts the wire holding Joker and Hood and Joker fall into the river.
Hood tells Batman to come to Crime Alley if he wanted Joker back. Showing up at a what seems to be a abandoned apartment Hood tosses Joker on the ground and starts to beat him with a crowbar,for payback after what Joker did to him five years ago. By the time Batman arrives Hood is done and waiting for Batman to arrive, When Batman shows up Hood and Batman fight it out and end up on a rooftop of a church and that's where Hood takes off his helmet and shows that in fact, he truly is Jason Todd. After another short fight Jason jumps through a window and back in the room Joker was being held in. Here the three finally are able to talk. Jason confronts Bruce as to why he never avenged him and tosses Bruce a gun and tells him to either shoot Joker or him(Jason), or else he (Jason) will kill the Joker by blowing "his deranged brains out," in which Bruce refuses and turns his back, tossing the pistol aside. Jason then shoots at Batman and misses with Batman throwing a small Batarang in the barrel of the gun Jason is holding right before he shoots again, making the pistol malfunction and explode, injuring his hand. However, Jason has an ace up his sleeve and sets off a bomb he planted in the room (similar to the one that Joker used to kill him). The bomb goes off and Jason is nowhere to be found, while Joker is found in the rubble laughing, and is returned to Arkham with Black Mask being set free with a million dollar bail and Batman going back out there, but only after telling Alfred that nothing has changed between Jason and him and sets off in his Batmobile . At the end, a quick flashback is left showing Jason's first day and first time in his Robin costume.