The film begins with the conclusion of the previous film as Michael Myers (Don Shanks) is shot and falls down a mine shaft. The state troopers toss dynamite down the mine, but Michael escapes in time and stumbles into a nearby river, where he floats to a hill. He comes across a hermit's shack. Michael falls into a coma and remains that way for one year while in the hermit's care. On October 30, 1989, Michael awakens, kills the hermit, and returns to Haddonfield, where his niece Jamie Lloyd (Danielle Harris) continues to live after nearly being killed by Michael the year before.
Jamie has been committed to a children's hospital, having been rendered mute due to psychological trauma, but exhibits signs of a telepathic link with her uncle. Dr. Sam Loomis (Donald Pleasence) becomes aware of Jamie's psychic link with Michael, and tries to convince Sheriff Ben Meeker (Beau Starr) that Michael is still alive. Meanwhile, Michael kills Jamie's sister Rachel (Ellie Cornell) by stabbing her in the chest with a pair of scissors, and begins stalking their friend Tina (Wendy Kaplan).
Michael kills Tina's boyfriend Mike outside a car garage with a sharp rake to his head. That night, Tina and Sam and Spitz go to a Halloween party at the tower farm. Sensing that Tina is in danger, Jamie, having regained her ability to speak, goes to warn her; her friend Billy goes with her. While Sam and Spitz are having sex in the barn, Michael appears and murders them, impaling Spitz with a pitchfork and slicing Sam's chest open with a garden scythe. He then leaves the barn and kills the two deputies that Loomis has asked to keep an eye on Tina for her protection.
After the party, Tina goes to the barn and discovers the bodies of Sam and Spitz and the deputies. Michael chases Tina, Jamie, and Billy with a car. While in pursuit of Jamie, Michael crashes into a tree and appears to be dead, but he soon emerges from the car, very much alive. Tina sacrifices herself to save Jamie, and Michael fatally stabs her in the chest. Loomis, Meeker, and the police arrive on the scene and rescue Jamie and Billy. Jamie agrees to put herself in danger to help Loomis stop Michael for good. Loomis lures Michael back to his abandoned home.
In the old Myers house, Dr. Loomis and the police create a set-up. Jamie has visions of Billy, which causes Meeker, along with most of his back-up, to leave the Myers house. Eventually, Michael arrives and kills the cop by banging his head on the dashboard. When Michael gets inside the house, Loomis finds him and tries to reason with him. While attempting to take his knife away, Michael attacks him and goes upstairs. At this time, a police deputy is dangling a rope out of the window and begins to help Jamie climb out. But things do not go according to plan, and Michael murders the deputy by hanging him out the window with the rope. However, Jamie manages to run past Michael.
She hides in an old laundry chute and is forced to abandon safety after Michael finds her and repeatedly stabs the chute. Michael chases her upstairs. Jamie hides in the attic before spotting Rachel's dog Max hung from a noose, as well as the bodies of Mike and Rachel. Michael finds her, and Jamie tries appealing to her uncle's humanity but ultimately fails after touching Michael's face, sending him into a fit of rage. Loomis appears, using a tranquilizer gun to weaken him and then proceeds to violently beat him unconscious with a wooden plank; Loomis suffers a stroke and collapses.
Michael is locked up in the sheriff's station, to eventually be escorted to a maximum-security prison. However, a stranger in black arrives and attacks the police station. Jamie walks through the station finding the bodies of gunned officers, and goes over to Michael's holding cell to discover that it is empty.
What do state troopers find in the mine?
dynamite