At a press conference held by Bruce Wayne to declare his opposition to Arkham City, TYGER mercenaries arrest and imprison him in Arkham City. Hugo Strange discloses his knowledge of Wayne's dual identity as Batman before releasing him into the prison's criminal populace. While Strange prepares to commence "Protocol 10", Wayne obtains his equipment via airdrop from Alfred Pennyworth, allowing him to become Batman. He first saves Catwoman from being executed by Two-Face, who hopes to gain respect by murdering her. After Joker attempts to assassinate Catwoman, Batman tracks him to his hideout in the Sionis Steelmill, believing Joker may know the truth behind Protocol 10.

There, Batman learns that the unstable properties of the Titan formula are mutating in Joker's blood, gradually killing him. Joker captures Batman and performs a blood transfusion on him, infecting him with the same fatal disease. Joker also reveals that Gotham hospitals have been poisoned with his infected blood. Desperate to save himself and innocent citizens, Batman seeks out Mr. Freeze, who had been developing a cure but has since been kidnapped by the Penguin.

Tracking Penguin to the Cyrus Pinkney National History Institute, Batman defeats his forces, his imprisoned monster Solomon Grundy, and ultimately the Penguin himself, before liberating Mr. Freeze. Freeze tells Batman that he has already developed the cure, but its instability renders it useless. Batman deduces that the restorative properties of Ra's al Ghul's blood can complete the cure. Batman tracks one of Ra's al Ghul's assassins to his underground lair, leading Batman into a confrontation with Ra's and his daughter Talia, Batman's former lover. With Ra's al Ghul's blood, Freeze is able to develop an antidote, but it is stolen by Harley Quinn before Batman can use it.

When he returns to the Joker, Batman finds him restored to health. While the two fight, Strange activates Protocol 10, which is revealed to be a scheme to wipe out the entire population of Arkham City and destroy the criminal element of Gotham. The TYGER troops begin executing inmates as Strange launches missile strikes on Arkham's denizens from his base in Wonder Tower. A missile hits the steelmill, burying Batman under rubble. Before Joker can take advantage of the situation, Talia arrives and offers him immortality in exchange for sparing Batman's life. After escaping with the help of Catwoman, Batman is convinced by Alfred to end Protocol 10 before pursuing Talia and Joker.

Batman infiltrates Wonder Tower and disables Protocol 10. Ra's al Ghul is revealed to be the true mastermind behind Arkham City and mortally wounds Strange for failing to defeat Batman. With his dying breath, Strange activates "Protocol 11", the self-destruction of Wonder Tower. Batman and Ra's escape, but Ra's commits suicide rather than risk capture. Joker contacts Batman, threatening to kill Talia unless Batman meets him at the Monarch Theater. Once Batman arrives, Joker demands the cure but is stabbed and apparently killed by Talia while distracted. Talia admits to stealing the cure from Quinn, when she is killed by a second Joker, still stricken with the disease. The healthy Joker that Talia stabbed then reanimates into the shapeshifting Clayface, who is revealed to have been masquerading as a healthy Joker all along at the ailing villain's request.

Batman incapacitates Clayface, but Joker blows up the theater floor, sending Batman plummeting into Ra's' lair below. Batman destroys Ra's' rejuvenating Lazarus Pit before the Joker can use it, and drinks a portion of the antidote. Batman debates curing his foe but is attacked by Joker before he can act, causing the antidote vial to inadvertently smash. Batman admits that in spite of everything Joker had done, he would have saved him. After Joker finally succumbs to his illness and dies, Batman carries his body out of Arkham City. As Commissioner Gordon asks what happened, Batman places Joker's body on the hood of a police car and leaves in silence.