On October 31, 1988, Michael Myers is shot and falls down a mine shaft. Sheriff Ben Meeker, the lynch mob of Haddonfield’s truckers, and state police toss down dynamite to finish him off. Escaping into a nearby creek before the dynamite explodes, Michael stumbles upon a local hermit and falls into a coma, placing himself in the hermit’s care, and being nursed back to health.
One year later, on October 30, 1989, Michael awakens, stabs the hermit to death with his knife, and returns to Haddonfield to find his niece Jamie Lloyd again, who narrowly avoided being killed by him the year before.
Jamie has been admitted to a children’s hospital, having been rendered mute due to psychological trauma, suffering from nightmares and seizures and being treated for attacking her foster mother under Michael’s influence, though her foster mother survived. Jamie exhibits signs of a telepathic link with her uncle. Dr. Sam Loomis becomes aware of Jamie’s psychic link with Michael, and tries to convince Sheriff Meeker that Michael is still alive. Meanwhile, Michael stabs Jamie’s foster sister Rachel to death with a pair of scissors, and begins stalking their friend Tina, also killing Tina’s boyfriend Mike with a rake. Tina never finds this out.
Later that night, Tina and her friends Sam and Spitz go to a Halloween party at a farm. Sensing that Tina is in danger, Jamie, having regained her ability to speak, goes to warn her. While Sam and Spitz are having sex in the barn, Michael kills Spitz with a pitchfork and decapitates Sam with a sythe. Tina finds the bodies and goes to the police deputies, Nick Ross and Tom Ferriah, who were guarding the house, for help, but finds that Michael has killed them. Michael appears and Tina flees, but Michael chases her with Mike’s car. Michael crashes the car into a tree, and Jamie and her friend Billy Hill from the clinic arrive. Michael gets out of the car and Tina sacrifices herself by letting him stab her to death to allow Jamie and Billy time to escape. Loomis arrives, and Jamie finally agrees to help him stop Michael for good.
With Jamie’s help, Loomis lures Michael back to his abandoned childhood home. There, Loomis creates a set-up with the police. However, Meeker and most of the police are called away when hear that Michael has broken into the clinic and killed Nurse Patsey and Dr. Max Hart, leaving Trooper Charlie Bloch to help Loomis and Jamie. When Michael arrives, Loomis tries to reason with him, but Michael stabs him and throws him over the banister, knocking him out. Michael goes after Jamie, and Bloch attempts to escape with her out of a window using a rope, but Michael ties the rope around Bloch’s neck and hangs him from the window, killing him.
Jamie races upstairs to the attic where she finds the bodies of Rachel and Mike. Michael finds Jamie, but before he can kill her, she tries to appeal to her uncle’s humanity. At Jamie’s request, Michael takes off his mask and he sheds a tear. However, when Jamie touches Michael’s face, he goes into a fit of rage. The awakened Loomis appears, using Jamie as bait, and lures Michael into a trap to weaken him with a tranquilizer gun. After beating Michael unconscious with a wooden plank, Loomis passes out from a stroke. Meeker and the police return and apprehend Michael. Michael is locked up in the sheriff’s station, to eventually be escorted to a maximum-security prison by the National Guard.
As an officer is about to take Jamie home, a mysterious man in black arrives at the station. The officer hears gunshots and screaming and goes back inside to investigate while Jamie waits in the car. After the commotion stops, Jamie goes back inside and finds all of the officers dead, including Meeker. She also finds Michael’s cell empty, revealing the man in black helped him escape. Realizing Michael will kill again, Jamie begins to sob in terror.