Years ago, Batman and Robin take on the case of a rainbow bandit, Firefly. Batman dons a different colored costume each night. They investigate and find the villainous Firefly breaking into a vault with his color weapons. However, he discovers his weapon is useless against Batman's costume of the same color. The heroes close in and Firefly summons the Rainbow Creature, which different powers for each color. It makes Robin 2-dimensional, and Batman reveals that his costume can take on all the colors of the rainbow. The Creature's powers are useless against it, and Batman knocks it and Firefly both out.
Batman tracks down the Ten-Eyed Man in the middle of a jewel robbery. As he fights the villain, Bat-Mite appears to watch his greatest superhero in action. While Bat-Mite reads up on the villain's origin, Batman reminds him that he promised to go back to his home dimension, and Bat-Mite finally provides Batman with a cactus to throw at the villain, blinding him.
Once the fight is over, Bat-Mite notes that Batman is way better than the Ten-Eyed Man, and he came back to see the ultimate fight: Batman vs. the Joker, his arch-nemesis. He shows Batman his shrine to their greatest battles, and an empty exhibit for the next one. Batman insists that the Joker is locked up in an impenetrable cell he designed personally, but Bat-Mite secretly frees him.
Batman tracks his arch-nemesis to the Comedy Museum and insists that Bat-Mite can only go in if he promises not to use his powers. Bat-Mite agrees and they quickly catch up to the Joker. However, the Joker's henchmen are waiting, including his henchwoman, Harley Quinn. Bat-Mite spots her and immediately falls in love, and talks to her while Batman and the Joker fight it out. Batman is quickly subdued and Bat-Mire prepares to help him. He remembers his promise, but figures he can keep it by giving Batman his powers. However, he misses and hits the Joker instead.
The Joker quickly masters his new powers and casually subdues Batman. Bat-Mite insists that the Joker give him his powers back, and the Joker "thanks" him by creating Joker-Mite and setting him loose on the imp. When Batman tries to intervene, the Joker knocks himself out and declares himself king of the world. He refuses to remove Batman's mask and turn him into a mere mortal, and then performs a musical number while terrorizing Gotham City.
The Joker then puts Batman in an iron maiden and sets off an elaborate series of items to lose it. Batman escapes... only to be hit by a giant hammer and killed. The Joker calls for a moment of silence, and then resurrects him. Joker-Mite wonders what to do with Bat-Mite, and Harley Quinn asks the Joker for mercy. The Joker transforms the powerless Bat-Mite into a court jester and then kills Batman again... and again... and again. As they watch, Bat-Mite and Harley Quinn realize their "heroes" are obsessed and they are better off without them.
Batman finally begs the Joker for the final mercy, but begs him not to make him insane. The Joker seizes on the idea and opens up Batman's skull, but Harley Quinn warns that it might not be a good idea. He silences her and puts Joker-Mite in charge, and then enters Batman's mind. Batman warns him to turn back, but the Joker starts breaking through a series of doors leading to the Caped Crusader's most cherished memories.
In the real world, Joker-Mite suggests to the henchmen that they kill Batman, taking the Joker with him. Harley Quinn and Bat-Mite realize they have to stop the crooks, and Bat-Mite has Harley Quinn say something. Her words appear on silent-movie cards, and they use them to attack the criminals. Bat-Mite defeats his counterpart but realizes there's nothing they can do for Batman.
The Joker finally finds his way to a room filled with file cabinets of Batman's memories. When he starts throwing the files out, Batman informs him that his disciplined mind makes him powerful, and the Joker is on his turf. He forces the Joker into a Gotham City where Batman doesn't exist, crime runs rampant, and the Joker is a normal, humdrum man. The Joker begs for release and promises to give up his powers in return for being anything but average.
The Joker finds himself back in the real world, and all of his effects are undone. Bat-Mite regains his powers and undoes the chaos, then asks if Harley Quinn wants to hang out. However, she chooses to stand by her man. Batman cheers up the imp by reminding him that he now has his own arch-nemesis, and Bat-Mite eagerly hauls Joker-Mite off to the fifth dimension for years of excitement