The film opens on October 30, 1988, nearly ten years after Michael Myers's last murderous rampage in Haddonfield, Illinois. An ambulance from Smith's Grove, IL makes its way along the road in a thunderstorm toward the Ridgemont Federal Sanitarium, where Michael, who has been in a coma since then, has been incarcerated. After the apprehensive transfer crew is seen off by medical chief of staff Dr. Hoffman, the ambulance makes its way up the driveway in the storm and back out onto the highway toward Smith's Grove. While in the ambulance, he hears that eight-year-old Jamie Lloyd, his niece and the daughter of Laurie Strode, his first target, is residing in Haddonfield. He immediately grabs and repeatedly bashes a hospital attendant's head against the wall of the ambulance and stabs his finger right into his skull. The other attendant, trapped by the ambulance's locked doors, can only watch helplessly. Soon after, the film introduces Jamie, who has been adopted by the Carruthers family and is still mourning the loss of her mother. Laurie supposedly died in a car accident eleven months earlier. Her older foster sister Rachel comes into her room and consoles her, telling her that she will love her just as much as her mother did. Rachel sends Jamie off to bed and exits the room. Jamie kneels down next to the bed and says her prayers when suddenly, lightning and thunder crash outside, startling her. The door creaks open and as Jamie gets up to close it, the reflection of Michael, donned in his classic white mask and black coveralls, appears in the mirror. Jamie returns to her bed and instantly, Michael's hand reaches out from under the bed and grabs her by the leg. Jamie struggles, gets loose, and runs to her closet. Opening the door, a second Michael appears in front of her, raising his knife. Jamie screams again, attracting the attention of her foster mother, Darlene, who rushes into the room. She finds Jamie, shaking on the floor of her closet, traumatized after what was only a horrific nightmare.
Dr. Loomis angrily marches into Hoffman's office the next day, berating him about the transfer of Michael Myers. Hoffman explains that it was mandated by federal law; as he does, he is interrupted by a phone call informing him of an accident involving the ambulance that was carrying Michael Myers. Immediately Loomis smells trouble, and the two men drive to the site of the accident. The state police have secured the scene; the ambulance is upside-down in a river with blood on both the outside & interior. One trooper tells Hoffman it was likely an accident, but Loomis does not believe it. Despite Hoffman's admonishments, Loomis wades into the river & walks round to the ambulance's rear. Inside is a scene of horror; blood is sprayed all over the walls & floor of the ambulance. Immediately, Loomis heads toward Haddonfield, certain that Michael Myers is headed there. Meanwhile, at a gas station, a mechanic works beneath a car, calling for someone to hand him a wrench. When he hears no response, he slides out. There is Michael, raising a long, sharp pole in the air. He thrusts it down into the mechanic's stomach, killing him instantly. Loomis soon after arrives at the gas station and finds the mechanic's body, hanging by a chain from the roof. He also finds several other bodies and immediately sees Michael, standing against the back wall. Loomis shoots at him, but Michael disappears. Loomis scurries out to the exterior of the gas station, barely catching Michael driving away in a truck. Just after, the entire gas station explodes. Loomis survives after crouching behind a nearby barrel.
Meanwhile, Jamie is coming home from school to see several kids coming upon her, taunting her that she has no mother. Jamie runs from the scene, crying. At home, Rachel plans to go out for Halloween with her boyfriend, Brady, but her parents refuse and force her to take Jamie trick-or-treating. Rachel protests and Jamie overhears, upset at the fact that Rachel doesn't want to spend any time with her. After seeing Jamie's reaction, Rachel finally grudges to babysit her that night.
At the city drug store, Brady and his friend, Wade, stand watching Kelly, a seductive young woman who is the daughter of Sheriff Ben Meeker. Wade wants to ask Kelly out on a date, but Brady and their other friends are worried because of her strict father. Wade ventures over to Kelly, but before he can say anything, she rejects him mercilessly. Wade stands there, totally embarrassed, as Brady and the other guys laugh hysterically. Soon after, Rachel and Jamie arrive to buy Jamie a Halloween costume. While there, Rachel leaves Jamie to tell Brady that they will have to cancel their date. Brady is frustrated and very angry with this last-minute blow-off. Jamie, left alone, finds a clown costume very much like the one that Michael Myers wore at age 6 when he murdered his sister. While looking in the mirror at the costume, Jamie sees her reflection change to that of a young Michael Myers who killed his sister 25 years before. Michael's hand seizes a white mask behind her; Jamie swirls around and sees him right there, pulling the mask down over his head & ready to strike. Screaming, Jamie backs into the mirror, shattering it. Rachel, at the other end of the store, kissing Brady passionately, hears Jamie's scream and rushes over to her. She finds her sitting there alone, unharmed. Rachel asks what is wrong and Jamie replies that she saw the "nightmare man." Rachel dismisses this as only Jamie seeing a creepy mask and takes her home. But immediately after they exit the store, they do not notice that Michael's reflection appears in one of the shards of glass from the mirror.
By this time, Loomis has reached Haddonfield after hitching a ride with an eccentric preacher. He marches into the sheriff's office, asking to speak to Sheriff Leigh Brackett (from Halloween 1 & 2), but is told that Brackett retired 3 years later & moved to Florida. A tall man at the back of the room introduces himself as the new sheriff; Ben Meeker. Loomis explains to a skeptical Meeker that Michael Myers is on the loose again and is in Haddonfield, hunting for Jamie Lloyd. When one of his deputies is unable to reach the state patrol due to downed phone lines (caused by the fire Michael started at the filling station), and Loomis tells the sheriff that 6 people are already dead, Meeker believes him and starts a hunt for Jamie & Rachel. Radio & TV stations are also called by the sheriff's office, and told to broadcast the order to clear the streets so the hunt for Myers can begin.
That night, as Rachel's parents are about to leave, Michael enters the house and walks upstairs into Jamie's bedroom. He sees the box of pictures of Laurie and picks it up with his severely burned hand. Afterward, Mr. and Mrs. Carruthers exit the house and Rachel takes Jamie out trick-or-treating. As they leave, Michael watches them carefully. Rachel and Jamie go to different houses, soon arriving at the Meeker house and Rachel sees Kelly, dressed in a t-shirt and panties and manages a "hello." Then, to her horror, Rachel sees Brady coming down the stairs! Rachel begins to storm off angrily, but Brady takes off after her. He tells her that he was only angry that she called off their date, but she accuses him of "just hopping off to the next best thing." Then, suddenly, without Rachel noticing, Jamie leaves with several other kids. Rachel soon after leaves Brady, who runs back into the house with Kelly. By this time, Rachel notices that Jamie is gone and begins to search the streets for her, panicking out of her mind.
Meanwhile, at a bar in Haddonfield, a television blares out a news report about Michael Myers having escaped. Earl, the old hilbilly bartender, orders everyone to be quiet and listens carefully to the report. Apparently, the sheriff's office is ordering all businesses in Haddonfield to close down. This frustrates Earl, who calls the police station, but he receives no answer. This arouses the feeling of suspicion in him and he and a few customers head off with their rifles in a search for Michael.
At this time, Dr. Loomis arrives at the Carruthers house with Sheriff Meeker and Deputy Logan. Dr. Loomis searches Jamie's bedroom upstairs and finds the overturned box of Laurie Strode's pictures on the floor. As Sheriff Meeker comes upstairs, Dr. Loomis tells him that he is sure that Michael has been here. Sheriff Meeker is not convinced until they both find Sunday, Jamie's dog, dead in her closet. Dr. Loomis suggests that he and Meeker go off to find Jamie. As they leave the house, Meeker orders Logan to stay behind in case Michael or the Carruthers return to the house.
Meanwhile, at the local power plant, an electrician by the name of Bucky is working late. As he turns around from his work, he sees a shape lurking behind his truck. It is Michael! Bucky becomes angry, thinking Michael is a teen trying to perform a prank, and heads over to him. He tells Michael that he is going inside to call the police and threatens him if he moves one muscle. As Bucky heads inside for the phone, Michael begins to follow him. Bucky swirls around and Michael grabs him by the shirt, throwing him onto the power unit. Sparks fly as Bucky is electrocuted and Michael watches as the lights in several houses go out.
At this time, on the streets of Haddonfield, the children are being picked up from trick-or-treating. It is getting late and Rachel is becoming increasingly worried that she still hasn't found Jamie, who is lost and afraid in the bad part of town where there is no one to help her. As Rachel continues to search for Jamie, Michael watches through the broken window of an abandoned house nearby. Rachel walks down an alley and finds a dead end. Around a corner, she sees the shape of a man shrouded in smoke. It is Michael! Frightened, Rachel runs through a yard and hops over a fence, barely escaping. Meanwhile, Jamie sees a bush rattling in front of her. She hopes that it is Rachel, but she knows better than that. She begins to threaten whatever the thing is in the bushes when Rachel instantly appears. They run towards each other and embrace. Soon after, Dr. Loomis and Sheriff Meeker arrive in a police car. They inform Rachel and Jamie of what is going on and put them in the back seat. Just as Meeker is about to drive away, he instantly sees a masked face behind a building. It is Michael for sure this time. But then, behind another corner, a second Michael stands, and a third. Meeker is confused, trying to decide which is the real one, when suddenly, two of them pull off their masks. They are only kids playing pranks. Meeker is distracted from the third Michael and yells at the kids to go home. He gets back in the car and he, Dr. Loomis, Rachel, and Jamie drive away. As the car speeds away from the street, the real Michael stands right behind them, silently watching.
They soon after arrive at the police station. Dr. Loomis and Meeker go in, finding it ransacked and several bloody bodies on the ground. At this time, Earl and the hillbillies pile out of their truck and enter the police station. Meeker tells them that this is police business and to stay out of it, but Loomis tells Earl & the other men that Michael Myers is responsible. Earl and the others are furious when Meeker tells them to let the police handle it. One of Earl's friends, a man named Al, had lost his son 10 years before in Michael's first homicidal rampage. Earl angrily informs the sheriff that it will be handled HIS way. 'We're gonna fry his ass', Earl tells Meeker, who berates Loomis for starting a lynch mob. Loomis angrily counters by reminding Meeker his police force is decimated. Not long after, Meeker receives a call from Logan, who has heard about the catastrophe at the station. Meeker orders Logan to go to his house to call the State Force. Logan hangs up and as he drives away from the Carruthers house, Michael sits calmly in the back seat, waiting for a chance to strike. After his car is gone, Richard and Darlene Carruthers return home and find that Rachel and Jamie are not there. Darlene becomes very worried. Meanwhile, Earl and the hillbillies are driving down the road when one of them claims to have seen Michael behind a bush. They all get out of the truck and repeatedly shoot at the bushes until they are positive that he must be dead. Walking over to the bushes, they find the body not of Michael, but of someone they know. Earl becomes annoyed at the hillbilly for his mistake.
Meanwhile, Brady and Kelly are on the floor of the Meeker house, making out when suddenly, the headlights of Meeker's police car appear on the wall. Brady and Kelly hurriedly get dressed and pretend to sit on the couch, reading magazines. As Dr. Loomis, Meeker, Jamie, Rachel, and Logan enter the house, Rachel sees how oddly Brady and Kelly are acting and knows exactly what happened. Meeker orders Rachel and Jamie to go upstairs and for Kelly to lock all the downstairs windows. He tells Dr. Loomis to go downstairs and watch the police radio and gives Brady a shotgun, asking him to secure all the beams in the attic. As Brady turns to go upstairs, Meeker warns him that if he catches him groping Kelly he'll have to use the shotgun on him. Brady runs upstairs, beyond frightened. Logan walks out to his car and sees that the back seat door is open. Worried, he gets his gun out of the trunk and goes back inside. Meanwhile, Brady goes upstairs to check on Rachel and Jamie. Not knowing what's going on, he asks Rachel, who informs him that Jamie's uncle, Michael Myers, is trying to kill her. After this, Brady arrives in the attic, nailing down all the loose beams. Instantly, he hears a noise, startled, and turns around, but nothing is there.
After Jamie goes to sleep, Rachel heads downstairs and finds Logan sitting in a rocking chair with the shotgun. She asks when they can go home and Logan replies that it won't be for long, just not to worry. Rachel exits the room when suddenly, Michael's face appears out of the shadows, but this goes unnoticed to Logan. Meanwhile, down in the basement, Meeker and Dr. Loomis receive a transmission through the radio. It is someone by the name of Frank Bute in Tuckerville. Meeker informs him of Michael Myers; Bute angrily asks if it's a Halloween prank. Meeker informs him it is NO JOKE and the troopers are needed immediately. Frank says he must get some information and Meeker sits, waiting. Dr. Loomis heads upstairs to the living room and meets Rachel. He asks about Jamie, knowing how much danger she is in, and Rachel replies that she is fine. Dr. Loomis tells Meeker that he is going to the Carruthers house to search for Michael and exits the house, Logan locking the door behind him. In the kitchen, Kelly is making coffee. Rachel comes in, angry at how Kelly tore apart her relationship with Brady, and they end up getting into an argument. Kelly snaps back at Rachel that she had better wise up to what men want or Brady wouldn't be the last man she'd lose to another woman. This is the last straw for Rachel, who takes the cup of coffee and pours it onto Kelly's shirt. Flabbergasted, Kelly gasps at her.
Downstairs in the basement, Meeker calls out through the radio, but no one is answering. Rachel goes down to see what is going on and he orders her to man the radio while he goes out to wait for the state troopers. As Rachel is waiting for a transmission, she hears a creak behind her, but sees nothing. Upstairs, Jamie wakes up, seeing that Rachel is gone, and is worried. Sitting up in bed, she begins to look around. In the kitchen, Kelly is finished making coffee and brings it into the living room to Logan, who is still seated in the rocking chair, shotgun in hand. Kelly sets the tray on the table and lights a candle. As the light floods through the room, she sees in horror Logan's lifeless corpse on the couch, blood trickling from his mouth. Kelly's eyes instantly dart over to the rocking chair. The man with the shotgun begins to stand up. It is Michael! As Kelly backs against a door, Michael raises her into the air and shoves the shotgun through her stomach and the door behind her, leaving her body hanging there.
In the basement, Frank finally comes back on the radio. Rachel answers and Frank tells her that the troopers will be there in 35 minutes. Rachel, sure that everything is alright now, heads back upstairs to the living room. She sees the rocking chair empty and begins to worry, when suddenly, she finds the corpses of Logan and Kelly and screams out. Hurriedly, she runs upstairs for Jamie. Tripping on the stairs, she gets back up and enters the bedroom. Jamie is gone! Rachel runs back downstairs and in her haste, runs into Brady, who believes that Jamie is probably dead. Rachel fights against his opinion defiantly as Brady goes to the front door. But it is locked and they are trapped in the house! Instantly, Jamie appears outside another upstairs room. Rachel runs up to her when Brady sees something. It is Michael, slowly advancing towards them! Rachel, Jamie, and Brady all run upstairs. Rachel and Jamie reach the attic stairs, calling for Brady, but he is staying behind to fight off Michael. Soon after, Michael reaches the top of the staircase and Brady attempts to shoot him, but the bullet goes the other way. Michael throws Brady against the wall, causing his nose to bleed. Grabbing the shotgun, he hits Michael in the face with the gun's butt. Swinging it again, Michael grabs it from him and throws it over the railing. Brady punches Michael in the face, but Michael grabs his hand and squeezes, breaking it. Lifting Brady into the air, Michael digs his fingers into his cheek. There is a crunch as Brady presumably dies. Rachel and Jamie arrive in the attic and begin hastily throwing things down onto the staircase, attempting to block Michael's entrance. But Michael fights through the rubble, reaching the top of the stairs. Seeing a tin can full of butcher knives, he grabs the sharpest one and heads toward Rachel and Jamie. Rachel grabs a suitcase and uses it to break the window. Jamie gets on Rachel's back and they climb up onto the roof. As they try to reach the arched part of the roof, they miss and Rachel trips on a loose shingle, sending them sliding backwards. Jamie turns around and screams as she sees Michael climbing up with them. Rachel lowers Jamie down to the chimney, but upon seeing Michael again, Jamie slips and slams into it instead. Michael soon reaches them, taking a swipe at Rachel's face. Rachel dodges the blow and ties Jamie to a cord, lowering her off of the roof. Suddenly, Michael strikes again, causing Rachel to lose grip of the cord and forcing Jamie to drop halfway down. Michael tries to strike Rachel, sending her falling over off the roof. She grabs onto the edge and begins to move to the side. Michael brings the knife down one last time and Rachel lets go of the roof, plummeting to the ground. Michael, thinking she's already dead, heads down to ground level to continue after Jamie.
By this time, Jamie has safely lowered herself to the ground and runs over to Rachel, who appears to be dead. Suddenly, Michael appears at the side of the house and begins to slowly walk towards Jamie. Jamie runs down the street, screaming for help, when instantly, Dr. Loomis leaps out from behind a tree and grabs her. He asks her where the schoolhouse is and she points somewhere behind him. They run off towards it, looking for a safe place to hide. Entering the schoolhouse, Dr. Loomis tells Jamie that they are safe, but Jamie knows that they both don't really believe that. Dr. Loomis tries to open the doors of several rooms, but they are all locked. As they turn to leave, Michael suddenly appears and shoves Dr. Loomis through the glass door. Jamie runs down the hallway, screaming, banging on all the locked doors. She crouches down in a corner, putting her hands over her face, sobbing. Looking up, she sees no sign of Michael. Jamie begins to stand up, walking back through the corridors, not believing that Michael is truly gone. She looks around every corner when she instantly sees him standing on a stairwell, knife in hand. Jamie screams again and begins to run down another staircase leading to another door, but trips and falls the rest of the way down. Michael slowly creeps down after her as she crawls toward the door. She is about to reach it when Michael grabs her by the leg! It appears he is victorious when suddenly, Rachel appears in front of Michael and sprays him with liquid carbon dioxide, blinding him & enabling Jamie's escape.
The hillbillies arrive at the schoolhouse soon after, hearing the alarm sounding off. Rachel runs outside and tells them that Michael is inside. They begin to head inside, attempting to kill him, but Jamie warns them not to. The hillbillies eventually decide to leave and let the state troopers handle Michael. Earl, Rachel, and Jamie get into the front seat with the rest of the hillbillies in the back of the truck, shotguns at the ready. As they head out of town, they encounter 4 Illinois State Police cars racing down the highway with lights & sirens towards Haddonfield, in response to Sheriff Meeker's call. After 2 of the men signal the troopers, the last one stops & tells them to proceed to a highway patrol substation about 4 miles down the road. They are some distance away from Haddonfield when suddenly, Michael's hand appears at the back of the truck and he begins to lift himself into the back. One of the hillbillies notices his presence and attempts to hit him with his shotgun, but Michael is too quick and stabs him in the back. Michael grabs Al, another hillbilly and stabs him in the side, and grabs several other hillbillies and throws them against the tailgate, causing it to burst open and throw them out into the street. Inside the truck, this entire action goes unnoticed by Earl. Michael throws the last hillbilly off the truck and Earl finally hears a noise. He looks behind him through the back window when Michael's hand breaks through the driver's side window and grabs Earl's neck. Jamie and Rachel watch in horror as Michael's fingers stab into Earl's neck, drawing blood and twisting, breaking it. Earl is dead. The truck swerves, causing Jamie to fall into the floorboard. Rachel opens the door and shoves Earl's body out, taking over the wheel. She jerks the truck this way and that, trying to make Michael fall off, but he keeps his grip, reaching through the broken window and grabbing Rachel. Rachel fights him off and slams on the brakes, sending him finally falling off and rolling across the street. As he stands up, Rachel has an idea. She floors the accelerator and slams into him. He goes flying into the field nearby, his grip loosening on the knife, appearing to be dead. At this time, the police cars arrive and Rachel runs out to talk to them, ordering Jamie to stay in the truck. But Jamie is too curious as she walks over to Michael's lifeless body, taking his hand in hers and feeling along his burn marks. Rachel and Sheriff Meeker instantly see her and yell for her not to touch him. Suddenly, Michael's grip tightens on the knife as he slowly begins to rise. Jamie ducks down as the police repeatedly shoot him. He staggers backwards from the multiple shotgun/rifle blasts and soon after tumbles into an abandoned mine shaft.
Sheriff Meeker escorts Jamie and Rachel home to a worried Richard and Darlene Carruthers. Dr. Loomis arrives as well, assuring everyone that Michael is buried in hell, where he belongs. Darlene goes upstairs to the bathroom and turns on the bathtub water, calling for Jamie to take a bath. Suddenly, someone appears in the hallway and puts on a mask. It begins to walk towards the bathroom, grabbing a pair of scissors. The shape approaches Darlene and downstairs, everyone hears her scream. Dr. Loomis runs to the staircase, raising his gun and watches in terror as he sees what is going on. Sheriff Meeker, Richard, and Rachel run after him. It is Jamie, wearing the clown mask, clutching the bloody pair of scissors with a menacing look on her face. Michael has been reborn! Everyone watches in horror as Jamie begins to raise the scissors high into the air...