Prologue Nine months after the |Joker's death, crime rates in Gotham City have dramatically declined, but Batman anticipates a new threat and maintains a vigil over the city. Before his death, the Joker sent his mutated blood to Gotham's hospitals, and several patients were infected. While most were cured, the patients who were not treated are starting to look and act like the Joker. Batman researches a cure for the mutations, and orders Robin to watch over the infected.

The Arkham Knight On Halloween night, Scarecrow unleashes his newest strain of Fear Gas in a diner, and threatens to release it throughout Gotham. Six million civilians are evacuated, but the city's criminals and supervillains stay behind, leaving Commissioner James Gordon and the Gotham City Police Department outnumbered. Batman investigates Scarecrow's presence, and searches for him in a rooftop safehouse, but instead finds and saves Poison Ivy, who was being held captive by Scarecrow's henchmen. In a makeshift Batcave in Gotham's Clock Tower, Barbara Gordon is collecting information on Scarecrow's new toxin, and traces its production to Ace Chemicals. Batman goes to investigate, but is confronted by the mysterious "Arkham Knight" and his militia, which has a massive army of unmaned tanks. Batman fights his way through the militia, learning from workers that Scarecrow is planning to produce a chemical explosion so large that it will cover the entire eastern seaboard in fear toxin. Batman reaches Scarecrow, who reveals to him that Barbara has been abducted by the Arkhan Knight before escaping. While reducing the blast radius, Batman is exposed to the fear toxin, which reacts with his own mutated blood to cause hallucinations of the Joker. Escaping from the exploding Ace Chemicals, Batman is forced to tell Gordon about his daughter's involvement in his crime-fighting, and the outraged Gordon swears that he will find Barbara without Batman's help.

Scarecrow's Plans Batman tracks the Arkham Knight to an underground tunnel network, hoping to learn Barbara's whereabouts from him, but instead gets ambushed by him. Batman then gives chase to the escaping convoy, only to learn that the driver is a decoy, using a voice synthesizer that makes him sound like the Arkham Knight. Batman interrogates the driver and learns that they are heading to the North Refrigeration. He and Nightwing interrogate the Penguin, who tells them that the Knight and Scarecrow are meeting with a businessman named Simon Stagg, who runs a pharmaceutical company. After boarding Stagg's airship, Batman discovers that Scarecrow paid Stagg to create a device known as the "Cloudburst", but Stagg tried to double-cross them and has been doused with fear toxin as punishment. After reaching Scarecrow and interrogating Stagg, Batman is again exposed to the toxin, which triggers a powerful hallucinogenic response. Scarecrow escapes with the Cloudburst. Batman receives a message from Scarecrow revealing that Barbara is in the same safehouse where Ivy was held, but before Batman can save her, Barbara is doused with fear toxin and shoots herself in the head. Batman and Alfred Pennyworth are devastated, but Alfred convinces Batman to not lose hope, for Barbara's sake. Alfred explains to Batman that the Cloudburst is a dispersal device designed to flood all of Gotham with the fear toxin. To counteract this effect, Batman enlists the help of Ivy, who takes control of a large tree which develops giant flowers capable of neutralizing the toxin.