After being caught in an explosion and nearly burning to death, Michael Myers is in a coma. On the night before Halloween, ten years after the events of Halloween II, Michael is being transferred from Ridgemont Federal Sanitarium to Smith's Grove Sanitarium. Laurie Strode has been killed in a car crash; however, one of the attendants inside the ambulance moving Michael says that Laurie had a daughter. Hearing this, Michael wakes up again and kills the ambulance crew, causing it to crash.
Laurie's daughter, Jamie Lloyd, is having nightmares about Michael, even though she doesn't know who he is. At first she does not want to go trick-or-treating, but when she is picked on by kids at school, she decides to find a costume and go trick-or-treating. While at the costume store, Jamie picks out a clown costume (similar to the costume Michael wore when he killed his sister), but encounters Michael himself, who grabs a William Shatner mask.
Dr. Loomis, who also survived the explosion but has burns on his face, informs the new sheriff, Sheriff Ben Meeker, of Michael's escape, so he and his police force try to protect Jamie and her foster family, the Carruthers, but Michael kills several people, including many of the cops. Sheriff Meeker calls in some troopers to stop Michael, but he nearly kills Jamie and her foster sister, Rachel. After Rachel falls from the roof and is thought to be dead (but survives), Dr. Loomis and Jamie run to a school, but Michael finds them there and attacks them.
An angry mob, led by a man named Earl, drives Jamie and Rachel away from Michael, but he gets on the back of their truck and kills all four of the men before attacking Jamie and Rachel. After Rachel gets Michael off her car and hits him with it, Sheriff Meeker and his troops arrive and shoot Michael multiple times until he falls into an abandoned mine shaft.
Dr. Loomis and Sheriff Meeker return Jamie and Rachel to their house, and Loomis says Michael is in Hell and the nightmare is over. However, Jamie, under the influence of Michael, attacks and stabs her foster mother with a kitchen knife (though she survives), much to Dr. Loomis's horror.
This film is followed by Halloween 5: The Revenge of Michael Myers.