Wealthy industrialist and genius inventor Tony Stark is in Afghanistan to demonstrate his new weapon, the "Jericho" missile, when his military convoy is ambushed. Stark suffers a severe chest injury during the attack and is captured by terrorists who want him to build a replica of his Jericho missile. During captivity, Stark discovers that his weapons, manufactured by Stark Industries, are being used by terrorist groups. With the help of fellow captive Dr. Yinsen, he secretly constructs a powerful armored suit equipped with weapons and devices to aid in their escape. During their escape attempt, Yinsen sacrifices himself to save Stark, a pivotal moment that profoundly changes Stark's perspective on his life and legacy. Stark, empowered by the suit, manages to escape and return to the United States, where he announces that his company will cease manufacturing weapons.

Back home, Stark refines his armor's design and power source, developing a more advanced and sleek suit. He takes on the role of a vigilante, using the suit to combat crime and terrorism, a decision that puts him at odds with his own company and longtime associate, Obadiah Stane. Meanwhile, Stark's personal assistant, Pepper Potts, and his friend, Air Force Colonel James Rhodes, become increasingly concerned about his erratic behavior and the mysterious changes at Stark Industries. As Stark steps into his new role, he begins to uncover a sinister plot that could have global implications, leading him to confront enemies that threaten both his own life and the world's safety.