The movie opens as Two-Face, the alter ego of former DA Harvey Dent, (Tommy Lee Jones) is holding hostages in a bank vault.
Batman (Val Kilmer) arrives at the scene, and consults with Dr. Chase Meridian (Nicole Kidman), who becomes enamored with Batman.
Batman then rescues the hostages, but is unable to foil the robbery.
While this is going on, Edward Nygma (Jim Carrey), a lowly worker at Wayne Enterprises, is doing unauthorized research at work. Nygma has invented an item which manipulates people's brainwaves and channels television programs into people's minds, making it feel like they are "inside the show". When Bruce Wayne enters, he presents his invention to him and shows him how it works.
However, when he asks for a response to his idea, Bruce answers negatively, saying that manipulating brainwaves is dangerous tampering and "raises too many questions". Nygma complains, but Fred Stickley, a senior worker, fires him as a response to him arguing and working without permission.
Driven mad by the amount of work he did being useless, Edward captures Stickley and demonstrates his invention's powers on him; however, he is actually stealing Stickley's brainwaves to raise his own brain power and literally outsmart Bruce. Nygma then murders Stickley and tampers with the security tapes overlooking them to make it look as if Stickley had committed suicide. He leaves a riddle at the scene for Bruce.
A while later, Bruce receives a second riddle and consults Dr. Meridian, who establishes that whoever is leaving the riddles is a "wacko" who is obsessed with Bruce. After this, Bruce invites her to the Charity Circus at the Gotham Hippodrome.
Two-Face and his thugs arrive at the event, firing guns and terrorizing the audience. They also bring a bomb that Two-Face will detonate if Batman does not reveal his identity at the circus (Two-Face blames Batman for failing to thwart a criminal who threw acid on Dent's face, disfiguring him).
The Flying Graysons, the circus acrobats, work to remove the bomb through an opening in the top of the tent. The youngest member, Dick (Chris O'Donnell), manages to push Two-Face's bomb out of the circus tent and into the water surrounding the tent by going ahead of his family. When he returns, he finds that Two-Face has killed the rest of his family by shooting up the wires that they were climbing on, sending them plunging to their deaths.
Feeling empathy for Dick's loss and feeling responsible for Batman's failure to show at the circus, Bruce takes a reluctant and devastated Dick in as a foster son. Dick wants to leave at first, but finds he and Bruce share a love for motorcycles and Bruce even offers to give Dick a rare one if he stays and fixes it.
Meanwhile, Edward Nygma, inspired and delighted by watching Two-Face's raid at the circus, decides to become a villain himself, The Riddler. He proceeds to show Two-Face his invention from Wayne Enterprises in his lair. The two villains make a deal: if Two-Face helps him steal enough priceless goods and money to fund his project, The Riddler will use "The Box" (the new name for his invention) to learn Batman's true identity.
Their deal sealed, Two-Face and The Riddler start their rampage. They rob many museums and other wealthy areas, collecting diamonds and money.
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