Two years after the Battle of Sokovia, Thor finds himself trapped in the realm of Muspelheim by the fire demon Surtur, who tells the God of Thunder that Odin is no longer on Asgard. Without the Allfather to protect it, Surtur plans to invade Asgard and destroy it, fulfilling the prophesy of Ragnarok. Thor, determined to save his home and his father, breaks free, defeats Surtur by taking his crown in the hopes that it would avert the prophecy of ruin he had received.
With Surtur's crown as a trophy, Thor returns to Asgard, only to find Odin, surprisingly alive and well, enjoying a play detailing Loki's dying moments during the battle with the Dark Elves. Thor realizes something is amiss and outs "Odin" as Loki, who survived the battle and had taken over Asgard after deposing Odin and stranding him on Midgard. Thor forces Loki to accompany him to Earth to search for their father, and in their search, encounter Dr. Stephen Strange. Strange is not pleased that Thor had brought his brother, who nearly destroyed Manhattan years before, to Earth, but agrees to lead them to Odin in exchange for Loki leaving the planet immediately thereafter.
Odin is found standing along on a cliff overlooking the sea in Norway. Sadly, he is dying, and his imminent passing would bring about Ragnarok. With his dying breath, Odin explains that Thor and Loki actually have an older sister: Hela, the Goddess of Death. During their conquest of the Nine Realms, Hela was the leader of Odin's army. Once the conquest was complete, however, realising Hela's appetite for conquest and domination was insatiable, Odin had his dangerous daughter imprisoned in another dimension and struck her name from Asgard's history. Unfortunately, his life force is the only thing keeping her caged away; once he is gone, Hela will be freed from her prison.
Once Odin passes away, Hela appears before Thor and Loki. Thor engages Hela, only to have his hammer, Mjolnir, crushed into pieces effortlessly by his warmongering sister. Realizing they were outmatched, Thor and Loki attempt to flee back to Asgard on the Bifrost Bridge to defend their home, only for Hela to pursue them, throw them out of the Bifrost Bridge en route to Asgard, and arrive herself. Once in Asgard, Hela immediately declares herself as its new ruler and sets about crushing any opposition to her new reign.
Thor, meanwhile, crashlands on Sakaar, a planet surrounded by wormholes that dump a never-ending cascade of garbage upon the surface. He is found by a slave trader dubbed "Scrapper 142", subdued with an implant that causes pain when activated, and sold to the ruler of Sakaar, the Grandmaster, to fight in gladitorial deathmatches for his amusement. To Thor's annoyance, Loki had already arrived on the planet and allied himself with the Grandmaster. To make matters worse, 142 is actually a Valkyrie, the last of Odin's elite female soldiers who died fighting Hela; "142" had escaped to Sakaar and used her skills to make a living on the junk planet while drinking away the traumatic memories of her sisters-in-arms dying by Hela's hand.
Thor learns that defeating the Grandmaster's champion in the arena could earn him a ticket back to Asgard, so he immediately challenges the champion. On the night of the fight, Thor discovers that the champion is actually the Hulk, a friend of Thor. Unfortunately, the Hulk is deaf to reason, Banner's influence too weak to reach out to Thor. Thor is left with no choice but to fight him, and manages to get the upper hand on the Hulk until the Grandmaster activates his implant and forces him to lose.
After recovering, Thor tries to convince Hulk and 142 to help him retake Asgard. Hulk is unwilling, having come to enjoy fighting in the Grandmaster's arena and convinced that he is unwelcome on Earth; as is 142, who is still traumatized from fighting Hela before. Determined to go it alone, Thor seeks out the Quinjet that had brought Hulk to Sakaar. After finding it, the Hulk tries to stop Thor, only for Thor to play the last transmission the Quinjet received from Natasha "Black Widow" Romanova. The memory of his feelings for Natasha allow Banner to finally revert back to his human form for the first time in a long time. With the Hulk dormant, Bruce is reluctant to do anything that could resummon his alter ego, concerned that he might not be able to come back if he transforms again. Nonetheless, he agrees to help Thor.
Displeased with Thor and the Hulk's disappearances, the Grandmaster tasks 142 and Loki with retrieving them. The two, competing for the Grandmaster's favor, come to blows, but 142 manages to get the upper hand and subdue Loki after he forces her to relive her memories of fighting Hela. When the four reunite, 142 finally agrees to help Thor. Loki, unwilling to face the Grandmaster's wrath, agrees to help them find a craft that can guide them through the biggest of the wormholes surrounding the planet, the "Devil's Anus", in exchange for escaping from the planet with them. Loki attempts to betray Thor again, but this time, after years of dealing with betrayals, Thor anticipates Loki's treachery and subdues him, leaving him behind while he, 142, and Bruce leave for Asgard.
Upon returning to Asgard, Thor finds the realm embroiled in combat; Hela had used one of the treasures of Asgard, the Immortal Flame, to raise an army of undead soldiers and her massive battle wolf Fenris, and was scouring the realm for Heimdall, who had taken the Bifrost Sword to stop Hela starting her conquest of the cosmos anew. With Hela's army about to assault a stronghold where Asgard's people have fled to escape her wrath under Heimdall's leadership, Thor goes to confront Hela to distract her, while Banner, Valkyrie and Heimdall help the Asgardians escape via the Bifrost. Thor engages Hela in single combat, but is overpowered once more, losing his right eye in the fight. Hela's undead army and Fenris attack the Asgardians on the Bifrost; despite the aid of Valkyrie and Hulk (Bruce willingly allowing himself to transform to aid in the battle), many Asgardians fall, Hela content to massacre them all if it gets her the Bifrost Sword back.
Thankfully, Loki joins the fray, having caught a ride with rebels from Sakaar who volunteer their ship to help the Asgardians escape. Thor however still does not manage to get the upper hand on Hela. As it seems he would die by her hand, Thor receives a vision of Odin, who tells Thor that Asgard is not just a place, but a people. So long as Asgardians live, they can find a new Asgard elsewhere. There was no way to stop Ragnarok: rather, Ragnarok was the key to defeating Hela. With his second wind, Thor fights off Hela and joins the fray as her army attempts to stop the Asgardians from escaping. Together, they eventually succeed in defeating the army with Hulk taking care of Fenris. As Thor and 142 distract Hela, Loki retrieves Surtur's crown from Asgard's vault and uses the Eternal Flame to resummon the fire demon. With Surtur revived, Thor and his allies, along with the Asgardians, flee as Asgard is destroyed, and Hela along with it.
On the refugee ship, Thor takes his place as the new King of Asgard. Repeating Odin's words that Asgard lives on in its people, he vows to find them a new home and sets his sights on Earth.
Months later, as the ship continues its long trek to Earth, he gets a chance to speak with his brother about the future, noting that he feels that things will be alright in the end. Unfortunately for them, Thanos's warship stands between them and a new home...