The film starts with a flashback to Christmas, 1955, when Trevor Broom tells the young Hellboy a bedtime story about a battle between man and elves. After years of fighting, elf Prince Nuada convinces his father, King Balor to have blacksmiths build an indestructible golden clockwork army controlled by a golden crown. The Golden Army proved to be so effective against the humans that Balor created a truce with the humans to prevent more carnage from happening. They agreed that the humans would keep to their cities and the magical creatures to their forests. This enraged the Prince, and he left in exile. The crown was broken into three pieces - one was given to the humans, and the other two kept by the elves - so that the Golden Army would never be used again, remaining dormant for hundreds of years.
In the present, Nuada, still bitter over his father's truce, declares war on the humans. After finding out the location of the first piece of crown at an auction house, he kills all humans present by releasing vicious tooth fairies upon them. The then kills his father and takes the second piece of crown. The final piece remains safe with his twin sister, Nuala. Hellboy and the B.P.R.D. quickly investigate the mysterious massacre at the auction house, where Abe finds out that Liz is pregnant with Hellboy's child. Hellboy, who is frustrated that the B.P.R.D. must remain a secret, reveals himself to the world by allowing himself to be pushed out of a window.
Upon hearing the news of Hellboy's public display, Washington sends a new agent to take charge of the B.P.R.D., Johann Krauss. Krauss is a medium who lost his body during a seance; his ectoplasm is therefore contained in a special suit. Krauss and the team discover that the tooth fairies had been purchased at a troll market which is located under Brooklyn Bridge. The team goes there to search for more clues, and in the process Abe encounters Princess Nuala, with whom he quickly falls in love. Nuala has obtained a map that leads to the Golden Army. Prince Nuada, however, attempts to stop the team and the Princess from escaping and sends his troll after them. Hellboy subdues the troll, but Nuada attacks with an enourmous magical creature, the Elemental, which proves more difficult to defeat. During the fight, Nuada taunts Hellboy and questions his affiliation with the humans as they, too, treat him like a monster.
Despite their eventual escape, Nuada tracks the team back to the B.P.R.D. headquarters using the magical bond between himself and his sister. Nuala senses her brother's approach and hides the final piece of crown in a book, throwing the map and its container into the fire. However, upon arriving, Nuala plucks the map's container out of the fire, revealing that the map is visible on the canister. Abe and Hellboy, who had been drinking, arrive to save the Princess, but fail because they were drunk. During the encounter, Nuala implants a deadly blade into Hellboy's chest which edges closer to his heart as the minutes pass, and he kidnaps his sister.
The team takes the mortally wounded Hellboy to the location of the Golden Army in Northern Ireland, where they convince a Bethmoora goblin to take them to the angel of death. The angel of death warns Liz that Hellboy is destined to doom humanity, but Liz pleads for Hellboy's life. The angel eventually removes the blade from Hellboy's chest and tells Liz to give him a reason to live. Hellboy awakens when she tells him of her pregancy.
Nuada is awaiting the arrival of Hellboy and the team at the hall that the Golden Army rests in. He bargains with Abe and exchanges Nuala for the last piece of crown. Nuala awakens the Army using the completed crown, and a battle ensues. After believing they had won the fight, the team is horrified when the Army begins to piece itself back together with ease. At this point, Hellboy remembers he is of royal blood (as the Son of the Fallen One, a Prince of Sheol), and uses his status to challenge Nuada. After subduing Nuada, Hellboy nobally lets him live, only for Nuada to try to stab him when he turns his back. Nuala sacrifices her life to stop her brother - their sibling bond means that anything that happens to her, also happens to the Prince. Abe rushes to Nuala's side and tells him of his feelings for her before she and her brother turn to stone. Using her pyrokinetic powers, Liz melts the crown, and the Golden Army is once again made dormant.
When they leave the underground compound, Tom Manning is angry at them for going to Ireland without being ordered to do so, but Hellboy, Liz, Abe and Kraus let him know that they're all resigning from the B.P.R.D.. As they walk away, Hellboy and Liz talk about their future with their baby, at which Liz points out she is actually having twins.