When they identify the address connected with the fingerprint, Bruce sets off on his motorcycle. Meanwhile, a parade is taking place for the funeral of Commissioner Loeb, and the mayor begins making a speech. Bruce eventually arrives at the address and goes into an apartment where he believes the Joker might be. Inside, he finds a number of men tied up around a pillar. They are policemen, who tell Bruce that Joker and his men took their guns and uniforms.
As Bruce looks through some binoculars at the window, the policemen on the street begin to raise their guns and shoot into the air, when suddenly, Gordon recognizes one of them as the Joker, and pushes the mayor to the ground before the Joker can shoot him. As Rachel and Harvey run towards a car, it appears that Gordon has been shot. Harvey goes to an ambulance where one of the police officers, who seems to have been conspiring with the Joker, is sitting, his leg having been wounded. Harvey asks him about Joker, before noticing that the cop is wearing a nametag that says "Officer Rachel Dawes." Seeing that there is no one in the driver's seat, Harvey gets in the front of the ambulance and drives away.
Two cops tell Gordon's wife that he's died and she shouts into the night, blaming Batman for her loss. That night, the cops shine a signal inviting Batman to come visit them, but he does not show up.
The scene shifts to Maroni at a club with his girlfriend. Suddenly, Batman appears and begins beating people up.
Harvey calls Rachel to tell her that Gordon is dead and she's been targeted. When he asks her if there's anyone she can trust, she decides that Bruce is the best person. "Bruce's penthouse is now the safest place in the city," she says.
Batman holds Maroni over the edge of a fire escape in an alleyway, before pushing him off and breaking his legs. When Batman questions him about the Joker, Maroni insists that no one is going to betray the Joker because he has no rules. "Nobody's going to cross him for you," Maroni says, suggesting that the only way to catch the Joker is for Batman to reveal his true identity.
In an alleyway, Harvey holds a gun to the head of the wounded policeman from the parade and questions him about the Joker. He flips a coin to determine whether or not he will kill him. "I don't know anything!" the man screams, when suddenly, Batman appears and informs Harvey that the man is Thomas Schiff, a paranoid schizophrenic, a patient from the Arkham Asylum, whom the Joker used as his bait.
Batman pulls Harvey aside and says, "You're the symbol of hope I could never be. Your stand against organized crime is the first legitimate ray of light in Gotham in decades." He then tells Harvey to hold a press conference the next morning, suggesting that he will reveal Batman's identity to the Joker, so that no one else will die. Harvey yells at him, "You can't give in!"
Bruce returns home to find Rachel there. She tells him that Harvey called her and informed her that Batman is turning himself in. "I have no choice," says Bruce. He then alludes to the fact that Rachel once told him they could be together if he stopped being Batman. "Did you mean it?" he asks, and as she tells him she did, they kiss. As he goes to leave, however, Rachel reminds him that if he turns himself in, they still won't be able to be together.
Bruce has Alfred burn all records that might link Lucius or Rachel to him. Alfred tries to convince him to be brave and not turn himself in, but Bruce insists that he cannot sit idly by while innocent people's lives are at stake, especially Rachel.
The next day, Harvey holds a press conference and tells everyone assembled that they must not give in to the fear that the Joker is spreading throughout the city. He suggests that they must let Batman handle the situation, even as people protest all the lives lost. When Harvey is unable to convince anyone of the importance of staying calm, he tells them that he is the Batman, and is promptly arrested. Bruce sees this happen, and looks confused.
Rachel watches the press conference at Bruce's apartment and is saddened to see that Bruce is letting Harvey become the fall guy. Alfred insists that Batman is instead allowing himself to take the blame for the system's failings and that that is an act of bravery. Rachel is disappointed in Bruce and goes to see Harvey as he is being imprisoned. Before she leaves, she gives Alfred a letter for Bruce, which she says is open.
Rachel visits Harvey and tells him that his lie is too dangerous. She tells him that Batman does not even know that he can get the Joker, which makes Harvey wonder how she knows what Batman is thinking. He kisses her as he is put into the back of a van and tosses her his lucky coin, which he says he will use to determine whether or not he goes through with it. It's a double-headed coin, which suggests that he will do this no matter what.
As Harvey is driven away, the van transporting him approaches a giant fire truck that is on fire, a warning from the Joker. One of the Joker's minions begins crashing into the cop cars and the Joker emerges from the back of a large truck and begins shooting at the cops. He then takes out a bazooka and begins shooting it at the cops.
Soon enough, Batman arrives, and attempts to rescue Harvey. In the midst of it, his vehicle is damaged and he must eject himself on a bike and chase down Joker. After an intense chase, Batman eventually manages to flip over Joker's truck. Joker emerges from the truck with a machine gun and encourages Batman to hit him, but Batman stays true to his code. As Batman crashes, Joker walks over to him and threatens him with a knife, but a cop holds a gun to Joker's head. It is Gordon, who faked his own death to protect his family, and he brings Joker in for questioning.
At the jailhouse, Gordon observes that they could find no DNA matches for the Joker, that his clothing is custom, and that he has nothing in his pockets except knives and lint. The mayor tells Gordon to go home and get some rest, before promoting him to Commissioner. A large man who claims his "insides hurt" gets put in the Joker's cell.
Gordon goes in to question Joker and asks what happened to Harvey Dent, who apparently never made it home. "Who did you leave him with?" Joker asks, suggesting that Harvey was handed over to Maroni's men. When Gordon goes to get coffee, Batman slams Joker's head into the table and asks him why he wants to kill him. The Joker laughs maniacally and tells him that he doesn't want to kill him, that they are actually very similar. Joker then tells him that, to the cops, Batman is just a freak like him. "They need you right now," Joker says, "But when they don't, they'll cast you out, like a leper." Joker suggests that he knows that human nature is ruthless and that he is just "ahead of the curve," which prompts Batman to slam him against the wall, trying to find out where Harvey is.
"The only sensible way to live in this world is without rules. And tonight, you're gonna break your one rule," Joker says, suggesting that both Harvey and Rachel have been kidnapped. Batman blocks the door, so that Gordon cannot get in, before beating Joker up. Joker taunts him, telling him that Rachel and Harvey are tied up separately and that Batman must choose between them.
The structure of the film, once the Joker is at large, becomes fairly simple. Law enforcement and Batman are on the Joker's heels, but always one step behind. Each scene becomes a matter of trying to piece together what Joker has in store, and his particularly showy and disturbing way of moving through the world makes him very difficult to catch. Every time the Joker is revealed, whether it is popping out of a body bag or emerging from a crowd of policemen at a funeral, it is shocking. His ability to shapeshift and blend into various scenes is what makes him such a terrifying figure.
The film is as much about a failing police force as it is about a criminal at large. Gotham needs Batman not only because it is being targeted by evil villains, but because the entire system is corrupt. Bruce Wayne is undoubtedly part of that system, in that he is a billionaire living off of corporate revenue and a trust fund, but the film suggests that his position in the upper echelons of society gives him a privileged view of the corruption and an ability to use his immense wealth of resources for good. While the film does not have a particularly cohesive or critical political perspective, it does contextualize the narrative within a city that is disfigured by corruption and incompetence.
Not only does Batman want to rid the city of crime and of the Joker, he also wants to pass on the responsibility of keeping Gotham safe to Harvey Dent. When he confronts Harvey in a dark Gotham alleyway, he tells him, "You're the symbol of hope I could never be. Your stand against organized crime is the first legitimate ray of light in Gotham in decades." Batman sees Harvey as a way out of his life of fighting crime, a chance to finally stop being a vigilante and fully embody his true identity of Bruce Wayne. Thus, we see that Batman is motivated not only by his desire to keep Gotham safe, but by his desire to retire from crime-fighting.
Batman's desire to retire is motivated not only by the fact that it promises to stop the Joker from his senseless killings, but also by the promise of finally having a normal life and being with Rachel. When she confronts him about discontinuing his career as the masked hero, he asks her if she would consider being with him if he stopped. She tells him she would and they kiss. Thus we see that Bruce is just as motivated in his desire to settle down romantically as he is by the crucial facts of the situation. His life as a bachelor is defined by his adventurous and dangerous life as Batman, but now Bruce is ready to hang up his cape and settle down into a respectable partnered existence.
While it seems that resolution is near when Gordon and Batman are able to take the Joker in for questioning, Joker maintains the upper hand when he has Harvey and Rachel tied up and holds both of their lives as ransom. In this moment, he puts two lives—both important allies to Batman—in Batman's hands. The ideological distinction between the two of them is made explicit, as Joker suggests that he lives in a world without rules, and Batman insists that he lives by one rule, which is the non-lethal code. Joker proves himself to be more evil than ever when he forces Batman to bend to choosing between the value of two lives.