Michael Myers (George P. Wilbur) has been in a coma for ten years and is being transferred to Smith's Grove Sanitarium by ambulance. Upon hearing that he has a niece, Michael awakens, kills the paramedics, and makes his way to Haddonfield to look for her. Dr. Sam Loomis (Donald Pleasence), learns of Michael's escape and gives chase. He follows Michael to a small gas station, where Loomis finds Michael has killed a mechanic for his clothes, along with a clerk. Michael then escapes in a tow truck and causes an explosion, destroying Loomis's car in the process. Loomis is forced to catch a ride to Haddonfield to renew his search for Michael.
Meanwhile, Jamie Lloyd (Danielle Harris), the daughter of Laurie Strode and Michael's niece, is living in Haddonfield with her foster family, Richard and Darlene Carruthers, and their teenage daughter, Rachel. It is Halloween and Jamie's foster parents are heading out for the night and Rachel (Ellie Cornell) is left to babysit her, causing her to miss her date with her boyfriend Brady (Sasha Jenson). Jamie knows about her uncle Michael, but she is unaware he is the strange man she has been having nightmares about. After school, Rachel takes Jamie to buy ice cream and a Halloween costume. Michael has already arrived in Haddonfield, and nearly attacks Jamie in the store.
That night, Rachel takes Jamie trick-or-treating, and Michael goes to the electrical substation and murders a worker by throwing him into live high voltage, plunging the town into darkness. Dr. Loomis arrives in Haddonfield and warns Sheriff Ben Meeker (Beau Starr) that Michael has returned to Haddonfield. Michael singlehandedly takes down a police station and slaughters the police force. A lynch mob is formed by the town's men, including a local bar owner, Earl Ford (Gene Ross), with the agenda to take down Michael. Rachel discovers Brady cheating on her with Sheriff Meeker's daughter Kelly (Kathleen Kinmont), and loses Jamie. After being chased by Michael, Rachel reunites with Jamie.
Sheriff Meeker and Dr. Loomis arrive and take the girls to the sheriff's house with Kelly and Brady, and a deputy. They lock and board up the house, and Loomis departs to look for Michael. With Sheriff Meeker in the basement awaiting the arrival of the state police, Michael enters the house quietly and undetected. He kills the deputy off-screen, and then murders Kelly by impaling her with a shotgun. Rachel discovers the bodies and races upstairs to get Jamie, but she is gone. Brady and Rachel realize they are trapped in the house, and Rachel finds Jamie. Michael appears and struggles with Brady before crushing his skull, killing him. Michael then chases Rachel and Jamie up to the attic. They climb through a window onto the roof and Jamie is lowered down safely, but Michael attacks Rachel and knocks her off the roof.
Being pursued by Michael, Jamie runs down the street, screaming for help and runs into Dr. Loomis. They take shelter in the school, but Michael appears and throws Loomis through a glass door before chasing Jamie through the school. Jamie trips and falls down a flight of stairs. Before Michael can kill his niece, Rachel appears, alive, and sprays him in the face with a fire extinguisher. The lynch mob and the state police arrive at the school after hearing the alarm. Earl and three men from the mob agree to take Jamie and Rachel over to the next town in a pick-up truck. Michael has hidden on the underside of the truck; he climbs into the bed of the truck and kills the men, including Earl. Rachel is forced to drive, continuously attempting to throw Michael off. She succeeds in doing so and rams him with the truck, sending him flying into a ditch near an abandoned mine. The police, along with Loomis arrive and as Jamie approaches Michael and touches his hand, he rises. The police shoot Michael until he falls down the abandoned mine.
Jamie and Rachel have been taken home, and Darlene and Richard - who have arrived home - console the girls. Darlene goes upstairs to run Jamie a bath. Overwhelmed by Michael's essence, Jamie dons a clown mask and stabs her foster mother with a pair of scissors. The film ends with Jamie standing at the top of the stairs, emotionless with the scissors in her hand and stained with blood, with Dr. Loomis screaming as Richard, Rachel and Sheriff Meeker stare in horror.
How does Rachel distract Michael, before he can kill his niece?
Sprays him in the face with a fire extinguisher