Scientist Richard Parker records a video message to explain his disappearance. Later, he and his wife, Mary, are aboard a private jet hijacked by a man sent to assassinate Richard. With the pilot dead, the plane crashes, taking the lives of both Richard and Mary.
In the present, Richard's son Peter continues to fight crime as Spider-Man. He pursues and apprehends Aleksei Sytsevich, who attempted to steal a truck containing plutonium vials. During the chase, Spider-Man rescues OsCorpIndustries employee Max Dillon. While speaking by phone with Gwen Stacy, Peter sees a vision of her father, police captain George Stacy, reminding him to leave Gwen out of it. Afterward, Peter meets with Gwen at their high school graduation ceremony, but insists he needs to keep his vow to her father and ends their relationship.
Peter's childhood friend Harry Osborn returns to Manhattan to see his terminally ill father Norman, CEO of OsCorp. Norman explains his illness is hereditary, and Harry is at the age where it first develops. Norman gives Harry a small device he claims contains his life's work. The next day, Norman dies and Harry is appointed the new OsCorp CEO. He humiliates the OsCorp board, which has been privy to Norman's secret biogenetic projects for foreign military powers.
Thinking that they have become friends, Max idolizes Spider-Man. While tending to some maintenance in an OsCorp laboratory, he loses his balance and falls into a tank of genetically modified electric eels. They attack him, and he mutates into a living electric generator. Meanwhile, Peter attempts to maintain a friendship with Gwen, but she reveals she may move to England for school. Before they can discuss it, Max wanders into Times Square and accidentally causes a blackout. Spider-Man attempts to calm him down, but the police fire at Max, making him lose his temper and attack. Spider-Man eventually stops him, and Max is taken to Ravencroft Institute.
The first symptoms of Harry's illness show, and he uses the device Norman gave him to deduce that Spider-Man's blood could help save him. He asks Peter, who has been selling photos of Spider-Man to the Daily Bugle, for help finding Spider-Man. Peter refuses, unsure of what effects the transfusion would have, and although he does come to Harry as Spider-Man, he still refuses, and Harry develops an intense hatred towards Spider-Man. The OsCorp board-members frame Harry for covering up Max's accident, and remove him as CEO. Harry's assistant, Felicia, informs him of equipment that could help him, so he makes a deal with Max (now calling himself Electro) to get him back inside the OsCorp building. There he finds a suit of armor and other equipment made by Norman, as well as venom from the now-destroyed genetically altered spiders. Instead of curing him, they transform him into a hideous, goblin-like creature.
Peter uses information left by his father to locate the video message in an abandoned subway station's hidden lab. Richard explains he had to leave because he refused to cooperate with Norman Osborn's biogenetic weaponization plans. Peter then hears a voicemail from Gwen, telling him she was offered the scholarship in England and is heading to the airport earlier than expected. He manages to catch her and professes his love for her, and becoming engaged they agree to go to England together. Electro causes another blackout, and Peter heads off to fight him. Gwen follows, and together they restore power and overload Electro's body, seemingly killing him. Afterward, the transformed Harry arrives equipped with Norman's armor and weaponry; upon seeing Gwen, Harry deduces Spider-Man's true identity and, swearing revenge for being refused the blood transfusion, kidnaps her. He fights Spider-Man at the top of a clock tower. Spider-Man subdues Harry, but despite his attempts to save Gwen, she is sent falling to her death by the collapsing gears. As soon as Spider-Man reaches the bottom of the clock tower and finds out that Gwen has died because of the fall, he begins crying and hugs her corpse. This event resulted in Peter giving up being Spider-Man and he spends every day at Gwen's grave.
Over the next five months, Harry is in Ravencroft and is healing from his transformations. His associate, Gustav Fiers (the "man in the shadows" from the first film), visits Harry and eventually breaks Sytsevich out of prison, equipping him with an electromechanical suit of armor. Calling himself the Rhino, he rampages through the streets. But a recording of Gwen's graduation speech inspires Peter to return as Spider-Man and fight him to an unknown conclusion.
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