Two years after the death of the Green Goblin, Peter Parker is struggling to balance his crime-fighting duties as Spider-Man alongside the demands of his normal life. He gets fired from his job as a pizza delivery guy because saving two children from getting hit by a truck causes him to be late to a delivery. Peter is growing further apart from both his love interest Mary Jane Watson and best friend Harry Osborn, and discovers that his Aunt May is facing eviction. Harry still harbors resentment towards Spider-Man, thinking him guilty of killing his father. Peter's obligations as Spider-Man take their toll on his ability to focus on his academic work as well as his financial situation. As a result, Peter starts to think about giving up being Spider-Man.
Harry, who is now head of Oscorp's genetic and scientific research division, is sponsoring a fusion power project by nuclear scientist Otto Octavius, who befriends and mentors Peter. Octavius's goal is to perfect fusion power. He wears a harness of powerful robotic arms with artificial intelligence for an experiment in sustained fusion. Though the experiment succeeds at first, it quickly becomes unstable but Octavius refuses to shut it down, before Spider-Man intervenes. Octavius's wife, Rosalie Octavius is killed in the accident, the neural inhibitor chip which prevents the arms from influencing his mind is destroyed, and the arms are fused to his spine. At a hospital, doctors prepare to surgically remove Octavius' harness. Without the inhibitor chip, the tentacles have become sentient and defend themselves by killing the doctors. Afterward, Octavius takes refuge at a harbor.
The tentacles corrupt Octavius's mind, and lead him to the resolution that he must complete his experiment regardless of the moral cost. To finance his work, Octavius robs a bank, where he takes Aunt May hostage. When Octavius is about to stab Spider-Man with his spear, May smashes a sunglasses lens with her umbrella, sparing Spider-Man, but Octavius drops her from a building. Spider-Man manages to save his aunt, but Octavius returns to his lair with loot stolen from the bank. The Daily Bugle dubs the scientist "Doctor Octopus" or Doc Ock.
While attending a party to take photographs, Peter learns that Mary Jane is engaged to astronaut John Jameson, the son of Bugle editor J. Jonah Jameson. Peter gets into a fight with Harry over his "loyalty" to Spider-Man. As Doctor Octopus rebuilds his experimental reactor, Peter's powers prove unreliable. After a doctor tells him that his physical problems are due to mental stress, he gives up being Spider-Man and disposes of his costume. During this time, Peter begins to succeed in college and subsequently mend his relationship with Mary Jane.
A garbage man brings Spider-Man's discarded costume to sell at the Daily Bugle. Jameson takes credit for Spider-Man's disappearance, but later admits that he was indeed a hero, and the only person capable of stopping Octavius. Peter, out of guilt, tells Aunt May that it was his fault for Ben's death. After Peter tells his aunt everything from the thief to Ben's death, May forgives Peter and advises him that sometimes it is necessary to sacrifice one's dreams for the greater good. The rise in the city's crime rates worries Peter. He saves a little girl from a burning building without his powers.
Doctor Octopus, having rebuilt his device, needs tritium for his reactor, and goes to Harry to get it, threatening to kill him if he does not comply. Harry agrees to give Octavius all the tritium he possesses in exchange for bringing Spider-Man to him. He tells Octavius to seek Peter, whom Harry believes is friends with Spider-Man, but tells him to not harm Peter. Doctor Octopus finds Peter and tells him to find Spider-Man, and abducts Mary Jane in the process. Following this, Peter finds that his powers have been restored, and he dons his costume again after stealing it back from the Bugle. A furious Jameson continues to denounce Spider-Man as a menace. Spider-Man then angrily proceeds to battle Doctor Octopus across town. As they battle, they fall onto a New York City Subway train. Octavius destroys the speed bar on the train and leaves Peter to save the runaway train. A small explosion on Peter's mask causes him to take it off. He tries to stop the train in many ways but he uses his webbing to stop it, almost making the train fall off the track. He saves the people at a great physical toll and almost falls off but the train's passengers carry him and learn that he is only a kid as Peter wakes up. Two boys hand Peter his mask and promise not to reveal his true identity. Doctor Octopus returns, and ends up knocking the now-weakened Spider-Man out and delivers him to Harry.
After giving Doctor Octopus the tritium, Harry pulls out the knife and prepares to kill Spider-Man, but he first unmasks him. He is shocked when he discovers that Peter is Spider-Man. Peter convinces Harry to put their conflict aside and direct him to Octavius' lair. Although Spider-Man attempts to rescue Mary Jane discreetly, Doctor Octopus catches on and they fight once more. Spider-Man ultimately subdues Octavius and reveals his identity to him, pleading for a way to stop the reactor. Free from the influence of the tentacles, Octavius uses his mechanical arms to collapse the building, successfully drowning the reactor at the cost of his own life. Mary Jane sees Peter unmasked and understands that as long as he is Spider-Man, she and Peter cannot be together. Spider-Man returns Mary Jane to John and leaves.
Meanwhile, Harry is visited by a vision of his father in a mirror, pleading for Harry to avenge his death, but Harry refuses to hurt Peter. Enraged, Harry shatters the mirror, inadvertently revealing a secret room containing his father's Green Goblin equipment (which Peter hid after his death). He looks at the equipment and takes the green serum his father did. Meanwhile, Mary Jane is getting ready for her wedding, but she has a quick change of mind, and leaves John on the altar and arrives back at Peter's apartment in her wedding dress. She tells Peter that she wants to be with him no matter what. After a passionate kiss, a fire truck is heard and Mary Jane encourages Peter to respond as Spider-Man, quietly apprehensive of the dangers they are about to face together in the near future.
