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In Christmas of 1955, a young Hellboy is told a bedtime story by his father, Professor Trevor Bruttenholm (John Hurt), involving an ancient battle between humans and mythical creatures. A Goblin built an unstoppable clockwork army for Balor, the King of the Elves, which could only be controlled by those of royal blood provided no one challenged their right to do so. This ’Golden Army’ of 4900 soldiers or "70 times 70 soldiers", decimated the humans so mercilessly that Balor forged a truce with them to stop the bloodshed: man would keep his cities and the creatures would keep their forests. Balor’s son, Prince Nuada (Luke Goss), didn’t agree with the truce, and left in exile. The crown was broken into three pieces, one piece going to the humans and the other two kept by the elves, so the Golden Army could never be raised again.

In the present, Nuada decides to declare war on the humans. He collects the first piece of the crown from an auction and kills his father for the second. His twin sister Princess Nuala (Anna Walton) escapes with the final piece. Meanwhile, Hellboy (Ron Perlman) is having relationship issues with his girlfriend Liz (Selma Blair). He is also having trouble accepting that their organization, the BPRD, must remain a secret. During a mission to eradicate thousands of ravenous tooth fairies, which Nuada set loose as he took the first piece of the crown, Hellboy reveals himself to the world. Abe Sapien (Doug Jones) discovers that Liz is pregnant in the commotion. Furious about the public unveiling, Washington sends a by-the-book agent, Johann Krauss (voiced by Seth MacFarlane), to take command. Krauss is another "special" agent of the bureau, existing in a containment suit as a gaseous being of ectoplasm. They track the tooth fairies to the Troll Market, an enormous merchant city hidden under the Brooklyn Bridge, for clues. Abe stumbles into Nuala, who has obtained a map leading to the Golden Army, during their search, and quickly falls in love with her following a brief psychic encounter. She is brought under BPRD protection following an attack by Nuada’s companion Mr.Wink and a forest elemental.

Nuada tracks his sister to BPRD headquarters using their magical bond, which causes them to share wounds and allows them to read each others’ thoughts to an extent. Nuala, sensing her brother’s arrival, burns the map and hides the final piece of the crown within one of Abe’s books. However, the real map is on the canister. Nuada kidnaps his sister and mortally wounds Hellboy with his spear. Unable to remove the spear shard, Johann, Liz, and Abe take Hellboy to the location of the Golden Army, hidden in Northern Ireland. They encounter the Goblin that oversaw the creation of the Golden Army, and he brings them before the Angel of Death, who has been waiting for their arrival. Though told that Hellboy would doom humanity if he lives, and that she’ll suffer the most from it, Liz pleads for Hellboy not to die. Amused by her choice, the Angel removes the spear shard from Hellboy’s chest and tells Liz to give him a reason to live. She reveals to Hellboy that he’s going to be a father.

The Goblin leads the team to the resting place of the Golden Army, where Nuada awaits them. In exchange for Nuala, Abe gives him the last piece of the crown. With the crown reformed, Nuada invokes the Golden Army and has them attack the agents. Counterattacking proves pointless, as the soldiers magically reform themselves when destroyed. Hellboy challenges Nuada for the right to the crown, and Nuada is forced to accept. Hellboy defeats and spares Nuada’s life, but the Prince tries to stab Hellboy in the back. Nuala commits suicide to stop her brother. Abe rushes to Nuala’s body and psychically tells her his feelings before she dies. Liz then melts the crown, shutting down the Golden Army forever. As the BPRD agents leave the underground compound, Agent Manning (Jeffrey Tambor) reprimands them for their actions. To his surprise, Hellboy, Liz, Abe, and Johann all hand over their belts (though Hellboy keeps his pistol) and announce their resignation from the bureau. As they walk away, Hellboy contemplates his future life with his baby. Liz stops and corrects him, saying "babies", surprising him with the fact that she’s pregnant with twins.