Hannonfield, Illinois, October 31, 1978. The film begins with the last few scenes of the original film, where Laurie (Jamie Lee Curtis) sends the two kids she's babysitting (Brian Andrews, Kyle Richards) to run and get help after the home has been invaded by psychopath Michael Myers (Dick Warlock). After the kids run off screaming, she is attacked by Myers again, and is rescued when Dr. Sam Loomis (Donald Pleasance) arrives and shoot Myers off of the upstairs balcony. From here, the film is entirely new.
Loomis rushes out to the lawn and finds that Michael has vanished, leaving behind only a bloody imprint in the grass. He instructs a neighbor to phone the news to the police and runs off in search of Michael again. After the opening credits, which similar to the opening credits of the previous film, shows a jack-o-lantern which slowly opens to reveal a human skull, Michael Myers, aka The Shape, lurks in the alleys nearby, watching Dr. Loomis from a distance.
Loomis meets up with Sherrif Leigh Brackett (Charles Cyphers) and they drive off in another direction in search of Myers. Myers then sneaks into a nearby house and steals a kitchen knife from a neighbor woman (Lucille Benson). Down the street, Myers sees a young girl by the name of Alice (Anne Bruner) outside and stalks her. Inside, Alice is speaking on the phone with a friend who informs her that someone was murdered in Haddonfield. Alice switches on the radio and is shocked at the news when suddenly, the back door creaks open. Afraid, Alice ventures into the living room where Myers jumps out and thrusts the kitchen knife into her chest, causing blood to spurt up onto her neck. Paramedics arrive at the Doyle house and take Laurie away on a stretcher. She appears to be in shock, and she begs them not to put her to sleep.
The two EMTs are Budd (Leo Rossi) and Jimmy (Lance Guest). Jimmy is younger and takes an immediate interest in Laurie, concerned and obviously distressed that someone close to him in age has been attacked in Haddonfield. They take her to Haddonfield Memorial Hospital, where she is tended to by the half-drunk Dr. Mixter (Ford Rainey), head nurse Mrs. Alves (Gloria Gifford), and RN Jill (Tawny Moyer). Meanwhile, Loomis and Brackett circle the neighborhood and happen upon a young man wearing a white mask similar to the one worn by Michael Myers. In a freak accident, they pursue him but an approaching patrol car crashes into him and then into the side of a van.
The violent explosion incinerates the body. One of the approaching patrolmen, Deputy Hunt (Hunter von Leer), has come to tell Brackett the bad news that his daughter is among the dead that have been discovered in the wake of Myers's rampage. They drive off to the location so that Brackett can identify her. Brackett, in shock at finding his daughter dead, blames Loomis for allowing Michael to escape and departs for his home, leaving Hunt in charge. Loomis convinces Hunt that Michael Myers could possibly still be alive, since they are uncertain who exactly was struck and killed by the patrol car. Another young nurse, Karen (Pamela Susan Shoop), who works in the nursery, arrives at the hospital after staying too late at a Halloween party. She is sharply reprimanded by Mrs.
Alves, even as they are both unaware that Michael Myers is lurking in the hospital, watching them. Earlier, Michael overheard a radio broadcast announcing that Laurie was taken to the hospital, and has followed her here. Jimmy schemes to be alone with Laurie, both to console her and get closer to her. He reveals to her that the crazy man who was pursuing her earlier was Michael Myers, who escaped from the mental hospital the previous night. Laurie is confused and does not understand why she seems to have been targeted by Myers. Mrs. Alves interrupts and sends Jimmy away, then discovers that the phones are suddenly out of service.
The security guard, Mr. Garrett (Cliff Emmich), explores the basement and rear of the hospital to search for the trouble and after he searches one of the closets, Michael suddenly leaps out and kills him by bashing him over the head with the back of a hammer. Mr. Garrett's death goes unnoticed despite the presence of a nursing assistant named Janet (Ana Alicia). Across town, Loomis and Hunt investigate a break in at the local elementary school and find that Michael Myers has been there; a child's drawing of a family has a butcher knife sticking in the image of the sister, and the word "Samhain" has been scrawled in blood on the chalk board. Loomis remarks on the Celtic origins of the word, and he is surprised when Marion Chambers (Nancy Stephens) approaches him. NUrse Chambers, who was with Loomis the previous night when Michael made his escape, has been sent with a Marshal (John Zenda) to return Loomis to Haddonfield, on orders from the governor. Loomis is forcibly taken away, while Hunt promises to find Michael.
Meanwhile, Michael Myers continues to murder the staff at the hospital. Budd and Karen attempt to make love in a hospital therapy pool, but Myers turns up the temperature until Budd gets out to check it. After strangling Budd to death, he approaches Karen from behind and seizes her, holding her under the scalding hot water until she drowns, the flesh peeled away from her face. Laurie has a reaction to her medication and goes into shock, and when Janet goes to get Dr. Mixter, she finds him dead in his private office, a needle thrust into one eyeball. Myers appears behind Janet and grabs her, thrusting another needle into her temple until she, too, falls down dead. Jimmy goes off to find help when nobody returns, and Jill is summoned by another patient. While she is gone, Michael enters Laurie's room at stabs at her bed, but she is gone (Laurie was only pretending to have a reaction to the medication).
When Jill returns, she finds the room empty. Hindered by a cracked ankle and dazed from the drugs, Laurie limps through the now-quiet halls of the hospital, looking for a safe place to hide. Jimmy reappears and sends Jill off to get help, telling her to drive into town and bring back the police. But after she leaves, he finds the body of Mrs.
Alves in a nearby operating room, tied to a table, an IV tube in her arm having drained all of her blood out onto the floor. Suddenly he panics and tries to run, but he slips in the blood and falls on his back, slamming his head down on the floor, rendering him unconscious. Jill attempts to leave the hospital, but finds all of the cars in the parking lot disabled, the tires slashed and the engines tampered with. After she runs back into the hospital, she sees Laurie in a hallway and tries to reach her, but Michael appears after resting for a while in one of the vacant rooms and kills her with a scalpel in her back. Laurie witnesses it and is terrified into action; she runs through the halls with Michael in pursuit. Rushing down a stairwell and into the basement, Laurie corners herself in a boiler room and must climb through a small window near the ceiling to escape, Michael almost slashing her ankles. After nearly cornering her again in an elevator, Laurie escapes and rushes into the parking lot, hiding in a parked car.
In the Marshal's car, Marion has a discussion with Dr. Loomis where she reveals information that he did not previously know; Laurie Strode is actually the sister of Michael Myers, born two years before Michael's original crime and adopted after the death of the parents two years after. Loomis immediately understands that Michael is after Laurie for a reason and commandeers the Marshal's car, pulling a gun on him and forcing him to make for the hospital. In the parking lot of the hospital, Laurie sees a dark shape open the car door and get inside--it is Jimmy. He tries to start the car and cannot; Laurie tries to talk to him but he falls over the wheel again, passed out. The horn goes off and Laurie panics again, her hiding place revealed. She tries to leave the car and falls in the parking lot, still dazed. As she lays there, the Marshal's car pulls up and Loomis, Marion, and the Marshal get out and go into the hospital.
Laurie cannot cry out until it's too late and they are inside, pulling the doors shut behind them. As she gets to her feet, Michael appears across the parking lot, walking slowly toward her. Laurie runs to the doors and bangs on them, screaming, and attracts the attention of the others. They let her inside and Myers walks right through the closed glass doors. Loomis shoots him with his gun and he falls over, seemingly dead.
After sending Marion out to the Marshal's car to use the radio for summoning the police, Loomis turns to comfort Laurie. Michael rises up again and slits the Marshal's throat with a scalpel, chasing Loomis and Laurie deeper into the hospital. They corner themselves in an operating room. As Michael breaks down the door, Loomis gives Laurie his gun, which only has two shots left in it. When Michael gets in, he stabs Loomis in the stomach. Loomis falls over, mortally wounded. Laurie tries to stop Michael by calling his name, which he stops for a minute to look at her, but he soon advances on her again and she shoots him in the eyes. Blinded, he starts swinging his scalpel wildly.
Loomis struggles to his feet and begins releasing oxygen into the room from the many tanks on the walls. Laurie follows suit until the doctor tells her to run. She bolts from the room and runs down the hall as Loomis ignites his cigarette lighter, causing a huge explosion. Even from the inferno, Myers emerges and keeps walking toward Laurie, until the flames consume him and he falls. As the sky lightens into morning, Laurie is taken outside the hospital and placed into the back of an ambulance, as reporters, authorities and other onlookers watch. She stares blankly as the ambulance pulls away, seemingly in shock, but alive.
The final image in the film is the face of Michael's burning corpse..