Harry, now head of Oscorp's research division, sponsors the brilliant nuclear scientist name Otto Octavius. Octavius who dreams of perfecting sustained fusion power, wears a harness of powerful robotic tentacle arms with artificial intelligence for an experiment.
Though the experiment seems to work at first, a power spike causes it to quickly destabilize. Despite this, Octavius stubbornly refuses to shut the experiment down, which leads to disastrous consequences: his wife is killed, the neural inhibitor chip which keeps the arms from influencing his mind is destroyed and the arms are fused to his spine. He is sent to a hospital, but the arms savagely kill the medical crew. The arms convince him to retry his experiment. To fund it, Octavius – now called Doctor Octopus or "Doc Ock" by the Daily Bugle – robs a bank.
After, Peter misses Mary Jane's debut play, and in retaliation she becomes engaged to renowned astronaut John Jameson, the son of Bugle chief J. Jonah Jameson. Peter loses his powers due to his emotional breakdown. He abandons his alter ego altogether and returns to his normal life while trying to reconcile with Mary Jane.
A garbageman brings Spider-Man's costume to J. Jonah Jameson, who takes credit for Spider-Man's disappearance. Peter tells his aunt May that his uncle Ben's earlier death was his fault. May forgives him, but when his nine-year-old neighbor learns of Spider-Man's disappearance and the rising crime rate in New York City becomes a major concern, Peter decides to become Spider-Man again.
Ock needs tritium to fuel his reactor and goes to Harry to demand it. Harry initially refuses because Ock's experiment threatens to level the city, but he eventually agrees in exchange for Spider-Man and tells him that Peter, who is supposedly good friends with Spider-Man, is the key to finding him. However, he tells Ock not to harm Peter. Ock finds Peter, tells him to find Spider-Man, and abducts Mary Jane. Peter realizes that his powers are restored and dons his costume again after stealing it from the Bugle.
Spider-Man meets and battles Ock, where they fall onto a rapid transit R train. Ock maxes out the train's throttle, disables the controls, and jumps off. Spider-Man stops the train before the track ends. When he faints from exhaustion, the passengers carry him into one of the cars. He comes to and realizes his mask is off, but the passengers are so grateful they vow not to reveal his identity. Ock returns, demanding Spider-Man, and easily subdues the passengers. After knocking out Spider-Man, Ock delivers him to Harry.
After giving the tritium, Harry prepares to kill Spider-Man, only to be shocked to see that it is really Peter. Peter convinces him greater things are at stake, and Harry reveals Ock's location. Spider-Man arrives at Ock's waterfront laboratory and tries to rescue Mary Jane discreetly. One of Ock's tentacles senses him, and they fight. Spider-Man ultimately subdues Ock, reveals his identity and convinces Ock to let go of his dream for the greater good. Octavius finally commands the tentacles to obey and drowns the fusion reactor, along with himself, into the Hudson River. Mary Jane discovers Spider-Man's true identity and feelings, as well as why they cannot be together. Spider-Man returns Mary Jane to John and leaves.
Meanwhile, Harry is visited by his father's ghost in a mirror, pleading for him to avenge his death. Refusing to hurt Peter, Harry shatters the mirror, revealing a secret room containing the Green Goblin's equipment. On her wedding day, Mary Jane decides to admit her true feelings for him. After they kiss, they hear a police chase, and she encourages Peter to respond as Spider-Man.