In the early 1980s, Gotham City is experiencing a quickly escalating class war that nears a breaking point with the pollution in lower class neighborhoods producing enlarged mutant rats. Stuck in the middle of it is Arthur Fleck, who lives in a grungy apartment with his mother Penny and works as a clown, and suffers from a mental disorder that causes him to randomly burst into uncontrollable laughter. His only escape from his miserable life is the talk show host Murray Franklin, who he imagines inviting him to the stage and calling him son. While hired out to advertise a store, some hoodlums steal the store’s sign right out of Arthur's hands and proceed to smash the sign over his head and beat the crap out of him when he comes after them. He is also rebuffed by a mother who finds Arthur's funny-faces to her daughter to be a little bit creepy. Arthur's boss refuses to believe the story about the hoodlums and the stolen sign and makes him pay for it. His co-worker Randall, out of the seeming goodness of his heart, gives Arthur a gun in case of future attacks.
Arthur takes another gig entertaining children in a hospital, where the gun falls out of his pants. The incident gets him fired, and he boards the subway back home too despondent to remove his clown outfit. He witnesses three young rich guys harassing a woman, and his laughter goes off and gets their attention. Thanks to their original target making a getaway, they harass him, then manhandle him, then outright beat him up when he tries to escape their clutches. Everything changes when Arthur pulls the gun and shoots two of them fatally, then tracks down the third, grazed yuppie and executes him in cold blood. Witnesses can only describe the killer as being dressed like a clown, which acts as the tipping point for the lower class as many start their own acts of violence against the rich while dressed as clowns, which is condemned by mayoral candidate Thomas Wayne. In the meantime, Arthur's social worker tells him that they won't be meeting anymore due to the city cutting their funding, meaning that Arthur won't be able to get his meds anymore.
Arthur is newly energized by successfully fighting back, and furiously tells off all his co-workers who have been such jerks to him while packing his things. He gets a gig in a comedy club as he’s always dreamed, and invites his neighbor Sophie Dumond to see him. Unfortunately, he’s hit with major stage nerves and his condition even acts up again. Even worse, someone films the whole thing and sends it in to Murray Franklin's show. Murray Franklin uses the thin veneer of condemning imitators in order to mock Arthur's performance, attacking his constant laughter without realizing it's a condition, reinforcing Arthur's self-deprecating "no one's laughing now" joke, and derisively saying, "Check out this joker," shattering Arthur’s admiration of him.
Arthur discovers a letter Penny wrote to Thomas Wayne, referring to Arthur as their son after an affair while she was a maid for the Waynes. Arthur is angry with Penny for not telling him the truth. He heads to Wayne Manor in order to find and talk to Thomas, and has an uncomfortable encounter with Thomas’ son Bruce until the butler Alfred Pennyworth intervenes. He goes on to confront Thomas in the bathroom at a public event, and Thomas claims Penny is delusional and their affair was all in her head, and that he had been adopted. Upon realizing that Arthur was the man who harassed Bruce, Thomas punches him in the face and orders him to never come near the Waynes again. In the meantime, Penny suffers a stroke and is hospitalized following a police interrogation regarding the subway murders. However, his relationship with Sophie at least remains strong and they keep going on dates.
Arthur goes to Arkham Asylum and steals Penny’s case file, which not only actually seems to back up Thomas’ story about Arthur being adopted, but also reveals that he had been abandoned by his real parents before his adoption by Penny and horrifically abused and neglected by both her and her boyfriend, resulting in her being institutionalized with delusional disorder and narcissistic personality disorder. Arthur breaks as he realizes that everything about his entire life has been nothing but a lie. It gets even worse when he visits Sophie's place, only for her to act like she barely knows him, and to be frightened when he does the finger-gun to his head gesture. It's revealed to the audience that he’d imagined their entire relationship and his mental illness is worse than he thought. Now filled with nothing but hatred for the woman who always called him "Happy", Arthur visits her in her hospital room, and after telling her that he always thought life was a tragedy but that he realizes that it's a comedy, Arthur murders Penny by smothering her with a pillow.
With the bit about Arthur's failure to perform at Pogo's proving surprisingly popular, Murray reaches out to Arthur to invite him on the show. Arthur agrees, though he actually intends to kill himself live on air. Shortly afterward, Randall and another former co-worker Gary stop by to check up on him. After learning that Randall is not here to help him but to make sure they have their stories straight regarding the gun that Arthur used to kill the three on the subway, Arthur brutally murders Randall with a pair of scissors, but allows Gary to leave as he was always the one nice person in the office. He leaves the apartment in full clown mode, dancing down the stairs as he revels in his newfound freedom. This gets him spotted by the police, but he loses them on a subway car full of clown protesters when the cops' increasing agitation and the protesters' anti-authoritarian slant escalate into a brawl, provoked by one detective accidentally firing his weapon in a struggle.
At Arthur’s request, Murray introduces him as “Joker,” and he quickly reveals himself as the killer who started the entire clown movement. Murray keeps his cool and confronts Arthur about all the violence he’s inspired, but the now fully confident Arthur is unrepentant and says the riots are only the natural result of people being pushed too far. Changing his mind about the suicide, he rants more about how the mentally ill like him are abandoned by society, and if the privileged like Murray let that happen long enough, “You get what you fucking deserve!” With that, Arthur murders Murray in front of the crowd and the cameras, and is arrested.
As Arthur is put in a squad car, he's delighted to see a huge crowd of rioters who revere him now that they know who he is. One of them rams the car, crumpling much of the front but leaving Arthur merely stunned, but the rioters recognize him and gingerly place him onto the hood to recover. Surrounded by adoring fans, he uses blood from his nose to paint a smile on his face and triumphantly stands tall before them, finally having the popularity he always longed for as he embraces his new identity of the Joker. Nearby, the Waynes are leaving a movie when the riots drive them into a dark alley, where one of the rioters kills both of Bruce’s parents and leaves him standing there alone, to one day become the Joker’s nemesis.
After being recaptured, Arthur is put in Arkham and interviewed by a psychiatrist. He starts their session by laughing, deliberately this time, and when she asks what the joke is, Arthur simply says “You wouldn’t get it.” Shortly afterward, he’s chased through the hall by the orderlies, leaving a trail of bloody footprints.
