Framed by Rorschach's journal, Watchmen begins with New York City police investigating the murder of Edward Blake — The Comedian. With the police having no leads, Rorschach decides to investigate Blake's murder himself. Rorschach believes that Blake's murder was the result of a plot to kill all masked vigilantes, and seeks to warn four of his retired teammates: Dan Dreiberg (Nite Owl), Doctor Manhattan, Laurie Juspeczyk (the second Silk Spectre), and Adrian Veidt (Ozymandias).
Following Blake's funeral, Manhattan is accused of causing cancer in his colleagues and friends, which results in Manhattan exiling himself to Mars. His exile brings forth political turmoil on Earth because he was one of the U.S. military's greatest assets. Meanwhile, Rorschach's belief that masked heroes are in danger is strengthened when Veidt is nearly assassinated, and he himself is accused of murdering Moloch, a former supervillain. Rorschach is imprisoned as a result of this accusation.
Juspeczyk is unsatisfied by her relationship with Manhattan because he no longer cares about the concerns of everyday people; his godlike powers make human problems appear trivial. As such, she begins a relationship with Dreiberg. Juspeczyk and Dreiberg don their costumes and return to their vigilante work. Together, they break Rorschach out of prison.
Juspeczyk and Manhattan argue on Mars, and Juspeczyk is forced to come to terms with the fact that Blake is her biological father. The emotion that Juspeczyk feels causes Manhattan to regain interest in human life. On Earth, Rorschach and Dreiberg discover that Veidt — now a successful businessman — may be behind the plot to kill all vigilantes. The two of them travel to Veidt's retreat in the Arctic, where he tells them that he has planned to stage an alien invasion in New York City. The invasion will kill half of the city's population, but he hopes it will unite the world against a common enemy. Rorschach and Dreiberg want to stop Veidt, but it is too late: his plan is already underway.
Juspeczyk and Manhattan return to Earth to find New York City destroyed, with a Cthulhu-esque monstrosity dead. The pair travel to the Arctic to confront Veidt, where he shows them the news reporting that the nations have all, indeed, come together to fight the common threat. Rorschach wants to expose Veidt for what he had done, and tells Manhattan that he will have to kill him if he wants to stop him. Rorschach encourages Manhattan to kill him, which he does.
Veidt asks Manhattan if he did the right thing, and Manhattan replies "Nothing ever ends," before leaving Earth to start new life elsewhere. Dreiberg and Juspeczyk adopt new identities and continue their romance together.
The series ends at a newspaper office, wherein an editor is complaining about having to abandon an article about Russia as a result of the new political climate. He is told to check the "crank" file, which housed rejected submissions. The story ends as he reaches towards Rorschach's journal.
