In 1981, clown and aspiring stand-up comedian Arthur Fleck lives with and cares for his mother, Penny, in crime-ridden and economically stagnant Gotham City. Arthur suffers from a neurological disorder that causes him to laugh uncontrollably at inappropriate times, requiring medication, for which he depends on social services. After Arthur is attacked by juvenile delinquents, his co-worker Randall gives him a revolver for self-defense. Arthur pursues a relationship with his neighbor, single mother Sophie and invites her to see his stand-up routine at a comedy club. At a children's hospital, Arthur's revolver falls out of his pant leg onto the floor in full view of the children. Randall lies to their manager, stating the gun was Arthur's own and Arthur is subsequently fired. Depressed on the subway, still in clown makeup, Arthur suffers a laughing fit and is accosted by a group of three drunk businessmen, shooting two of them in self-defense and murdering the third as he attempts to flee. The killings are condemned by billionaire mayoral candidate Thomas Wayne, whom the men worked for, calling supporters of the killer "clowns." Protesters react by donning clown masks in Arthur's image. Budget cuts shut down the social service program, leaving Arthur without medication.

Sophie attends Arthur's stand-up routine, which goes poorly; he laughs uncontrollably and his jokes fall flat. Arthur intercepts a letter from Penny to Thomas, alleging that he is Thomas's illegitimate son, and berates his mother for hiding the truth. He goes to Wayne Manor, where he meets Thomas' young son Bruce, but flees after a struggle with the family butler Alfred Pennyworth. Penny suffers a stroke and is hospitalized. Arthur's idol, popular late-night talk show host Murray Franklin, mocks Arthur by showing clips of his failed performance, calling him a "joker", angering Arthur. Arthur sneaks into a private event at a film theater and confronts Thomas, who tells him that he is not his father and that Penny is not his biological mother. In denial, Arthur visits Arkham State Hospital and steals Penny's file, which states she was a narcissist who adopted Arthur while working as a housekeeper for the Waynes in the 1950s. Penny then raised Arthur with her abusive boyfriend, who later died in jail. Penny was subsequently institutionalized at Arkham for failing to stop the abuse.

Distraught, Arthur enters Sophie's apartment unannounced. Frightened, Sophie talks to Arthur as if the two had never met, saying that she just recognizes him from down the hall, then asks him to leave. The film flashes back to moments where Arthur had seen Sophie, revealing that Sophie had not actually been there, confirming that the two were strangers and her presence in his life was a delusion. The following day, Arthur smothers Penny at the hospital, killing her for her deceit. Arthur is invited to appear on Murray's show due to the sudden popularity his stand-up clips have attracted, with Arthur accepting while secretly planning to kill himself on live television. Arthur's ex-colleagues Randall and Gary visit him at his apartment, and Arthur kills Randall out of revenge while sparing Gary for treating him kindly in the past. As Arthur, now dressing in a colorful costume and clown makeup, walks to Murray's television studio, he is intercepted by two detectives who suspect his involvement in the subway killings.