In 1985, detectives investigate the death of Edward Blake in New York City, after an intruder threw him through the window of his high-rise apartment. After the police leave, the costumed vigilante Rorschach enters Blake’s apartment and starts his own investigation, quickly discovering that Blake was the Comedian, another masked vigilante. Believing that he has discovered a “mask-killer conspiracy,” Rorschach warns several other retired vigilantes, including Daniel Dreiberg (Nite Owl), Laurie Juspeczyk (Silk Spectre), Jon Osterman (the superhuman Dr. Manhattan), and Adrian Veidt (Ozymandias), though none of them take Rorschach’s theory seriously. At Edward Blake’s funeral, Daniel, Jon, and Adrian recall their memories of the Comedian—all of them remember him as vicious, even murderous.
Laurie, currently dating Jon, feels neglected by him and leaves him to date Daniel. Simultaneously, although Dr. Manhattan is America’s ultimate weapon against Soviet expansion, a reporter accuses him of causing dozens of former friends’ and lovers’ terminal cancer. The accusation makes Dr. Manhattan so upset that he teleports himself to Mars, and the Russians quickly take their opportunity to begin invading the Middle East and occupying new territory. On Mars, Jon remembers how he became Dr. Manhattan when he was caught in an experimental machine that tore his body apart with radiation, after which he learned to make himself a new superhuman body. The government immediately enlisted him as a weapon and used him to win the Vietnam War. As a superhuman, Jon is not only physically powerful but also experiences every moment in history all at once—he can see both the future and the past. He is also super-intelligent, and earth’s technological progress leaps forward several decades with Jon’s new scientific insights.
An assassin attempts to kill Adrian Veidt, but fails and dies in the process. Rorschach, still investigating the “mask-killer conspiracy,” walks into a trap and is framed for murdering Moloch, a retired villain. The police arrest Rorschach and imprison him, and Rorschach reveals his backstory to the criminal psychiatrist Malcolm Long: how he grew up in an abusive home and created the persona Rorschach to punish evil-doers. Meanwhile, Laurie and Daniel come out of retirement for one night and go adventuring as Silk Spectre and Nite Owl, mainly as a way to combat their boredom and sense of helplessness against the looming threat of World War III. After becoming Nite Owl again, Dan feels reenergized and decides that they must break Rorschach out of prison. During a prison riot, Rorschach fights his way through the other inmates and Dan and Laurie pick him up in their airship. However, the police already suspect Dan and Laurie of being illegal vigilantes, and they arrive at Daniel’s house immediately after Rorschach disappears from prison.
As the police are banging on Daniel’s door, Jon appears in his living room and teleports himself and Laurie back to Mars. Jon tells Laurie that he feels utterly disconnected from the human race and needs Laurie to convince him to return to Earth and prevent World War III. Laurie debates with Jon about nihilism and the meaning of life and helps him to see that human life has its own meaning, even without God or any guiding force, simply because it is phenomenally improbable that life can exist at all. Jon agrees to return to Earth with Laurie and save humanity.
Meanwhile, Daniel and Rorschach escape the police and keep investigating who is behind the Comedian’s death, Rorschach’s framing, and the attempted assassination of Veidt. However, they discover a set of computer files that indicates that Veidt is behind everything himself, from Jon’s exile to Mars to the Comedian’s murder. Daniel and Rorschach travel to Antarctica to confront Veidt in his remote base. Veidt expects them and reveals his ultimate plan: He has long believed that the many governments on earth would eventually destroy each other and themselves in the process, wiping humanity out forever. To prevent this, Veidt has spent years engineering a massive creature, a squid-like monster that humanity will believe is an alien. He will teleport the creature into New York City, where it will detonate, killing millions of people and simulating an alien attack. This, Veidt hopes, will frighten the U.S. and the Soviets so much that they will lay down arms and form an alliance against this new existential threat, thus bringing about world peace. Veidt’s plan horrifies Daniel and Rorschach and they vow to stop him, but Veidt reveals that he already executed it half an hour ago.
Jon and Laurie teleport into New York City to find corpses everywhere, along with the remains of Veidt’s alien creature. Jon teleports them both to Antarctica. Veidt attempts to kill Jon to stop him from disrupting his plan, but Jon overcomes Veidt and moves to crush him. But then, Jon hears the news report that the America and the Soviets have declared peace. Jon, Laurie, and Daniel realize that they must let Veidt’s plan proceed unhindered; if they reveal what he’s done, the illusion of an alien invasion will be shattered, along with the world’s newfound peace. However, Rorschach is unwilling to compromise his morality for the greater good. He intends to reveal Veidt’s actions to the world, so Jon kills him to prevent it. However, Rorschach had taken meticulous notes on his investigation in journal and mailed it to a newspaper before leaving for Antarctica. In the last frame, the journal sits, with an employee at the newspaper potentially about to read its contents.
