After being resurrected by an unknown entity following the Miles County Massacre, Art the Clown murders and severely mutilates the coroner investigating his dead body with a hammer. He goes to the laundromat to clean his blood-soaked garments, where he encounters a little pale girl dressed in similar clown makeup. A lone patron witnesses Art engaging with the girl, who remains invisible to him, before he impales her through the head with a mop handle off-screen.
A year later, Sienna Shaw is finalising her Halloween costume: a warrior princess, a creation of her late father, who succumbed to a brain tumour that triggered bizarre visions. Her brother Jonathan intends to go as Art the Clown. Sienna expresses concern about the situation to their mother, Barbara. That night, Sienna has a dream where she encounters Art in a commercial for a restaurant. He hands everyone candy, except for Sienna, who gets a beating heart in a box with worms and black goo. He then whips out a Tommy gun and shoots everyone in the commercial except for Sienna, who tries to run away. He then torches the remaining guests and the guitarist. Before he catches her in the dream, a fire ignites on her dresser, waking her up and incinerating the wings she had designed for the costume. Among the ashes, her father's sword remains unscathed.
The next day, it is Halloween. Jonathan sees Art and the little girl at school playing with a dead opossum. He runs away and bumps into a teacher, who then finds the opossum and suspends Jonathan, mistakenly believing he is the one who brought the animal into the school. Meanwhile, Sienna goes to the costume shop to find a replacement pair of wings. There, she encounters Art, who playfully antagonises her before she leaves. Art mutilates and then decapitates the shop vendor and later follows Sienna's friend Allie home, where he attacks and viciously mutilates her body, pouring bleach over her and rubbing salt over her wounds. When her mother discovers her body, she runs away screaming and is in turn killed, with her head being used as a prop by Art to serve candy to children, some of whom complain about how sticky the candy is.
Meanwhile, Barbara discovers that Jonathan has been suspended and refuses to let him leave the house for the evening, while Sienna intends to go to a party with her friends. Jonathan calls Barbara a "bitch" and is then slapped by her in return. Jonathan storms off, furious, and appears to vandalise the family car. Barbara tidys up the mess, only to discover Art inside the car, where he sustains a gunshot wound to his face. Jonathan returns home to find his deceased and mutilated mother. Art proceeds to smash mashed potatoes in her unrecognisable face. Art then chases him to the bedroom, where he incapacitates Jonathan with a needle.
At the party, Sienna is unknowingly given molly by her friend Brooke. As the drug reacts to the alcohol and the Xanax she had previously taken, Sienna has a panic attack when she sees the little girl dressed as a clown. Brooke and her boyfriend Jeff are driving Sienna home when she gets a call from Jonathan (whose voice is actually being mimicked by the little girl), saying that he is at an abandoned carnival. There, Sienna investigates the premises, including a haunted house named the Terrifier. Meanwhile, a brutal attack and death await Brooke and Jeff. Sienna finds Brooke's dead body in a dingy bathroom, where she also discovers Art and Jonathan. After failing to kill the seemingly immortal Art several times, Sienna is stabbed in the stomach with her father's sword and seemingly dies, falling into a dream she had earlier in the movie, trapped in a water torture cell.
Art tries to wake up a comatose Jonathan and begins eating him. Sienna, meanwhile, is resurrected by the sword and decapitates Art using the same weapon. He appears dead, and the ghostly little girl takes his head and leaves. Sienna and Jonathan embrace.
In a post-credits scene, an institutionalised Victoria, the mutilated sole survivor of the first movie, goes into labour, writing swear words in
