Plot
While out on patrol one evening, Barbara Gordon (Batgirl) fails to stop a robbery in progress but, with the help of Batman, manages to apprehend one of the criminals involved. The perpetrator is Paris Franz, nephew of a powerful mob boss. Franz becomes attracted to Batgirl and starts sending her messages. After Franz tricks her into finding his uncle's dead body, Batman becomes concerned for Barbara's safety and takes her off the case, arguing that she will eventually be tempted to kill the criminals she pursues. Outraged, Batgirl begins attacking Batman physically and verbally, which quickly spirals into them having intercourse. A few nights later, Batgirl tries to apologize to Batman, but he is ambushed by Franz and his men, prompting her to come to his aid. When she arrives and overpowers Franz, he makes her lose control, resulting in a brutal beating with Batgirl stopping just short of killing Franz. Realizing Batman was right, she retires from crime-fighting.
Later, Batman investigates a murder scene with Detective Harvey Bullock and concludes that the Joker, currently held at Arkham Asylum, must be behind the crime. Batman goes to Arkham to talk to Joker, only to discover that he has escaped and put a decoy in his place. Joker then attacks Barbara and her father, Commissioner James Gordon. He shoots her in the stomach, paralyzing her from the waist down, kidnaps Gordon and takes him to an abandoned amusement park. There, Joker removes his clothes and subjects him to torture, particularly by showing him photos he took of Barbara, naked and in pain, much to Gordon's horror.
The story is intercut with flashbacks of Joker's origin story. It is revealed that he was once a lab technician who quit his job to become a stand-up comedian, only to fail miserably. Desperate to support his pregnant wife Jeannie, he agrees to help two criminals rob his former workplace. The criminals tell him that he has to use the Red Hood's mask and cape, secretly intending to frame him. During the planning, the police interrupt to inform the comedian that Jeannie and their unborn child have died in a household accident. Grief-stricken by the loss of his family, he tries to withdraw from the plan, but the criminals convince him into keeping his commitment to them, which he reluctantly accepts.
At the plant, the criminals and the costumed comedian run into security personnel. As the group attempts to escape the plant, the criminals are gunned down and the comedian is confronted by Batman. Terrified and unaware of his surroundings, the comedian trips and falls into the chemical plant's waste pond and is swept through a pipe leading to the outside. As he removes his mask, he is shocked to see the chemicals have permanently disfigured his face, giving him a clown-like appearance. His disfigurement, combined with the loss of his family and what he had experienced in the chemical plant, drives him completely insane and transforms him into the Joker.
In the present, Batman finds and saves Gordon as the Joker flees. Gordon remains sane and demands that Batman capture the Joker "by the book". Batman follows the Joker as the latter tries to persuade him that the world is merely one big joke and that "one bad day" is all it takes to drive an ordinary man insane. Batman subdues Joker, tells him that Gordon has remained sane, and concludes that Joker is alone in his madness. He then attempts to reach out to him, offering rehabilitation. Joker apologetically declines, saying it is too late for him. He then says that the situation reminds him of a joke about two patients in an insane asylum who try to escape by leaping over a gap to an adjacent building. The first patient makes it across, but the second patient is afraid that he will fall. The first patient gets an idea: "Hey, I got this flashlight with me. I'll just shine it across the gap between the buildings and you can walk across the beam and join me." The second patient questions the idea: "What do you think I am, crazy? You'll just turn it off when I'm halfway across!" Initially stoic, Batman soon joins Joker in sharing laughter at the joke. The police soon arrive and the Joker's laugh trails off while Batman continues laughing.
In a mid-credits scene, Barbara, having retired as Batgirl due to her past encounters and paralysis, is shown using a wheelchair and taking on the mantle of Oracle while preparing to go "back to work".