Marion Whittington (Nancy Stephens)--formerly Marion Chambers--returns home to find that her house has been broken into. She goes to her neighbors and phones the police, but her teenage neighbor insists on investigating her house. After getting the all-clear, Marion goes in and finds that her office has been ransacked; she was responsible for taking care of Dr. Sam Loomis, now deceased, and she discovers that the file she kept on Laurie Strode (Jamie Lee Curtis) has been stolen. Marion feels as if she's not alone in the house. Rushing next door, she finds her teenage neighbors murdered, and Michael Myers appears, wearing a trademark white mask. Michael stalks and kills Marion, then gets into a car and drives off just as the police arrive to investigate the break-in, discovering the bodies.
Laurie has relocated to California. She is now known as Keri Tate, headmistress of a small private prep school. Laurie has a teenage son named John (Josh Hartnett), and the two of them live on campus with the rest of the students. Laurie still struggles with the events of Halloween night 1978, when Michael Myers stalked her and killed those around her. As a means to escape her past, she faked her death and has been living under her assumed identity of Keri ever since. Her past trauma, as well as the stress of living under false pretense, has turned her into a functioning alcoholic. She is also heavily dependent on medication for her emotional condition.
Laurie has a secretary named Norma (Janet Leigh) who dotes on her like a parent, and notices how Laurie gets particularly shaken around Halloween. Laurie's boyfriend, Will Brennan (Adam Arkin) is a guidance counselor at the school, and the two of them share a semi-discreet relationship. But Laurie's relationship with John is becoming strained; she is overprotective of him and refuses to allow him much freedom. He is to stay within the locked school grounds at all times, and she denies him the right to attend an annual school camping trip to Yosemite, which is on Halloween. John's girlfriend Molly (Michelle Williams) also stays behind due to some problems with her tuition. Their friends Charlie (Adam Hann-Byrd) and Sarah (Jodi Lyn O'Keefe) also fabricate reasons to stay behind so that the four of them can celebrate Halloween together on the near-deserted campus. John and Charlie convince the school's security guard, Ronny (LL Cool J) to open the gate and let them out so that they can walk into town and shoplift a bottle of wine for their party.
Laurie meets Will for lunch in town and opens up to him a little, acknowledging that she's been unable to deal with something in her past. While he's in the men's room, Laurie chugs her glass of wine and orders another, hurrying the waiter so that Will won't realize she's had two instead of just one.
On her way back to the school, Laurie sees John and Charlie walking down the street and becomes enraged that John has left the school grounds. John also gets angry at Laurie, asserting himself and telling Laurie that she needs to accept the fact that Michael Myers is dead. Laurie drives Charlie and John back to school and scolds Ronny for allowing the boys to get out.
Meanwhile, Michael Myers has arrived at the school. He follows Laurie downtown and lurks outside the school later, staring in at Molly as she sits in Laurie's literature class. Laurie addresses the students before they leave for Yosemite and lectures them to be on their best behavior. Afterwards she surprises John by telling him she's changed her mind and she will allow him to go with the others. Since he has already made plans with Molly, Charlie and Sarah, he stays behind anyway without Laurie's knowledge.
That night, Michael Myers slips onto the grounds of the school by distracting Ronny at the gate. Ronny is unharmed but knows something is wrong. John and his friends get ready to eat dinner together when Charlie goes off in search of a corkscrew. Sarah follows him, and they are both murdered by Michael Myers.
Will and Laurie carve a pumpkin together and Laurie tells him that she is not Keri Tate and that her real name is Laurie Strode. Will thinks she is joking when she tells him that her brother killed her sister with a kitchen knife, and that years later he came after her. Will eventually realizes she's telling the truth and wonders how old Laurie was at the time. She tells him she was 17, then suddenly realizes that John has just turned 17 as well. Her sense of panic sets in and she tries to call John; the phones are dead. She immediately goes to her bedroom and retrieves a gun, discovering John's camping gear in his closet; she now knows John never left for Yosemite. Ronny appears at the front door and tells them that there is a strange car parked in the driveway. They decide to search for John and the others.
Meanwhile, John and Molly get restless and search for Charlie and Sarah, finding Sarah's body hanging from a light fixture. Michael Myers appears and gives chase, and they flee back to John's residence. Myers corners them in a doorway blocked by a gate. Laurie and Will open the door and let the kids inside just barely in time before Myers can get inside the gate; Laurie and Michael stare at each other momentarily through the door's tiny window. Before Laurie can get her gun, Myers disappears.
Laurie puts John and Molly in a room and locks it, while she and Will look for Myers in the hallway. Will sees a shadow and thinks it is Myers, grabbing Laurie's gun and shooting. It is really Ronny; Will has shot him in the head. As they panic about the mistake, Myers appears and stabs Will to death, chasing Laurie down the hallway. She hits him over the head with a fire extinguisher and runs off with John and Molly. They make it to their vehicle and Laurie drives off to the front gate.
Before she drives off, Laurie has a sudden moment of revelation. Instead of running, she sends John and Molly off and closes the gate behind them, breaking the mechanism that opens it. She then grabs a fire axe and sets out looking for Michael. She finds him back in the school and the two of them stalk each other, wounding each other with the axe and various knives. Finally Laurie stabs Michael several times in the chest, sending him hurtling over a balcony into the mess hall. He seems dead, but Laurie knows better.
Help arrives at the school; John and Molly have sent the police. Ronny is alive, the bullet having just grazed his head. Laurie's wounds have been bandaged, and she sees the coroner carrying Michael's body on a stretcher. She knows ultimately he will return, and that she must make sure he's dead once and for all, so she steals a policeman's gun and forces the medics at gunpoint to load Michael into a nearby van. Laurie takes off at high speed.
While she drives down the mountainous road, Myers begins to reanimate and pulls himself out of the body bag. Laurie slams on the brakes and sends him through the windshield, driving into him with the van. The van plunges over the hillside and both Laurie and Michael are thrown from it. Michael gets the worst of the deal; the van slams into his body and pins it against a fallen tree. Laurie finds the fire axe and approaches Michael, who is still alive, but helpless. She calls to him and he looks up at her, mute but seemingly asking her for help. Laurie reaches out for him, their fingertips touching briefly, and she feels pity for Michael. Suddenly her rage wells up inside her, and she decapitates Michael with a single blow.