In an alternate United States, beginning in 1939 during the fading Interwar period, a team of costumed crime-fighters is formed – the ”Minutemen”. The 1960s Vietnam War era through the mid-1980s Cold War sees the rise of the “Watchmen” team of heroes, whose existence dramatically affects world events. In 1959, after his apparent death in an Intrinsic Field Generator accident, Dr. Jon Osterman remakes his body as a god-like being dubbed “Doctor Manhattan”. The U.S. government utilizes his powers to win the Vietnam War and gain a strategic advantage over the Soviet Union which, by 1985, threatens thermonuclear war. The Comedian suppresses evidence of the Watergate scandal, allowing President Richard Nixon to win a third term. By overwhelming public support, the 22nd Amendment is repealed.
As anti-vigilante sentiment sweeps the nation, coupled with a nationwide police strike, the Keene Act is passed in 1977, declaring all “costumed adventuring” and “vigilantism” illegal. While most heroes like Daniel Dreiberg (Nite Owl II) and Laurie Jupiter (Silk Spectre II) retire, Doctor Manhattan and the Comedian become government agents, and Rorschach continues to operate outside the law.
In 1985, investigating the murder of Edward Blake, Rorschach discovers Blake was the Comedian. Theorizing that someone is eliminating former costumed heroes, he warns his retired comrades. Doctor Manhattan ignores Rorschach, Dreiberg is skeptical, and vigilante-turned-billionaire Adrian Veidt (Ozymandias) dismisses Rorschach’s suspicions.
During a televised interview, a reporter proposes that Doctor Manhattan has given several people close to him cancer. Doctor Manhattan exiles himself to Mars, giving the Soviets the confidence to invade Afghanistan. Rorschach’s suspicions appear correct when Veidt survives an assassination attempt, and Rorschach finds himself framed for the murder of former villain Moloch. Arrested and sent to prison, Rorschach is revealed to be Walter Kovacs. He explains his childhood abuse to psychiatrist Dr. Malcolm Long, and a turning point in his career as Rorschach: he discovered a child kidnapper had murdered his victim and fed her to his dogs; killing the kidnapper, Kovacs “became” Rorschach. Jupiter goes to stay with Dreiberg, and they decide to come out of retirement, helping Rorschach break out of prison. Transporting Jupiter to Mars, Doctor Manhattan probes her memories and discovers she is Blake’s daughter; he realizes the miracle of her life–created in spite of the fact that Blake raped Jupiter, although they later fell in love–and they return to Earth. A gang murders Hollis Mason, the first Nite Owl, mistaking him for Dreiberg.
Rorschach and Dreiberg discover that Veidt is behind the conspiracy. Rorschach records his suspicions in his journal, which he leaves at the office of the New Frontiersman, a right-wing tabloid. Rorschach and Dreiberg confront Veidt at his Antarctic retreat, and he admits to orchestrating Blake’s murder, Manhattan’s exile, Rorschach’s framing, and the attempt on his own life. He explains his plan to unify the U.S. and U.S.S.R. by detonating energy reactors in the world’s major cities, generating a Radioactive Decay Signature similar to Doctor Manhattan’s. Rorschach and Dreiberg attempt to stop Veidt, but he subdues them and reveals his plan is already in motion: the reactors have exploded, and world leaders believe Doctor Manhattan is responsible for the attack.
Jupiter and Doctor Manhattan return to a devastated New York City and determine Veidt is responsible, teleporting to his base. Failing to kill Doctor Manhattan, Veidt shows a televised news report revealing the U.S. and the Soviet Union have united against their “common enemy”: Doctor Manhattan. Although his allies agree to conceal the truth to preserve the new global peace, Rorschach refuses. Doctor Manhattan intervenes, and complies with Rorschach’s demand to kill him to keep him from revealing the truth.
Doctor Manhattan departs permanently to another galaxy, while Dreiberg rejects Veidt’s belief that world peace was worth the lives sacrificed. Dreiberg and Jupiter return to New York with plans to continue fighting crime, and Jupiter reveals to her mother that she knows Blake was her father. An editor at the New Frontiersman gives a young employee permission to print a collection of crank submissions, among which is Rorschach’s journal.