In an Arkham Asylum cell, Batman is strapped with a straight jacket. To the resident staff, he's now the latest addition to the Arkham line of maniacs, and nobody will listen to a word he says, due to his apparent insanity. With no other choice, Batman starts recounting the tale of how he ended in such a situation.
He recounts how, some days before being locked in Arkham, he learns of a plan to poison a special spa near Gotham. While fighting the man drilling into the spa's pipes, Batman and the man are doused with the poison the man was going to pour into the system. Later on, though, Batman has other concerns--the man was hospitalized following a severe bout with hallucinations and nightmares, both extremely vivid, and while examining the blueprints of the device the man was to use (a miniature version of a water purifying pump of considerable size, recently stolen) in his computer, he briefly saw Joker reflected in the Batcomputer's screen, but when attacking in response, it is just Alfred. Batman, by now worried, enters the hospital and sees the man, and talks to the supervisor, Dr. Wu. While Wu has already analyzed and procured an antidote to counter the poison, its effects include sedating the target for two full days. Batman realizes he can't afford the risk of sleeping for so long, so he pockets the medicine without taking it and heads off to Arkham to search for the Scarecrow, the only man with the knowledge on fear to create such a chemical. Nevertheless, while in the road, he sees Robin standing in the middle of the road, and when he swerves, he crashes-and is promptly rescued and imprisoned by the Arkham staff.
As Batman's incoherent blabbing and hallucinations grow worse, the Arkham administrator, Dr. Bartholomew, decides to take him in as a patient and ignore his pleas to call Commissioner Gordon and Dr. Wu, dismissing them as delirium, and leaves the cowl on him as he believes removing it could shatter the remains of his sanity. When Batman tries to escape when he sees he's being treated as a lunatic, he's subdued and locked in his cell. He accuses the Scarecrow, but the clueless Dr. Bartholomew simply dismisses this as incoherent and assures Scarecrow is contained. Here ends Batman's recounting.
Later on, though, Scarecrow, safe in his lair, revels in the fact Batman is now considered a madman, and reveals he tricked Batman into attacking the man trying to poison the spa to infect him. His giant pump machine is ensconced within the cave network below Arkham, which supplies Gotham with water. After filling it with his new fear toxin, he plans on releasing massive amounts into the town's supply, transforming Gotham into a fear-filled inferno. When Dr. Bartholomew realizes Batman could be telling the truth, he tries to talk to him, but he does not set him free, as he still considers him dangerous.
Realizing he has no other choice, Batman attacks the orderlies, despite the fact he's straightjacketed. He manages to overcome the first orderlies, but realizing he can't compete with a larger force of them, he escapes and manages to free himself of the straightjacket. Subduing a guard, he finds the entrance to the Arkham reservoir, but before the can attack Scarecrow's machine, he is again assaulted by hallucinations of practically all his rogues gallery, and even Robin and Alfred play a part in a massive nightmare where Batman is attacked from all fronts and eventually thrown into an abyss, where he is devoured by a giant Scarecrow. Barely snapping out of it, he finds the giant pump and attacks it, but the hallucinations kick in again and he is left to attack what from his point of view is a horde of monsters (in reality, just a bunch of thugs). He again manages to overcome the fear and destroy the master console. However, Scarecrow foresaw that and had installed a second command console for such an eventuality. When he reaches the second console, however, he is finally plunged in a nightmare without end and sees a simple power cord as a vicious snake. Yanking it, he triggers the machine's destruction, and manages to pull together and defeat Scarecrow, who is exposed to the gas when a tank containing it bursts.
Scarecrow ends up imprisoned in the upper Arkham Asylum, and Batman is finally able to take the antidote, and as he sleeps, a large bat shadow covers in as he lies in bed.
- It's strange that Batman couldn't free himself from the straitjacket as he had been able to do so while chained upside down in a water torture tank in the previously produced and aired episode "Be A Clown." Though, this could be due to the fact that he had been induced with Scarecrow's fear gas and was unable to perform to his full potential.
- Batman's large hallucination features appearances from Joker, Penguin, Two-Face, Poison Ivy, Robin, Alfred and finally Scarecrow.
- The plot by the Scarecrow in this episode to poison Gotham City's water supply by using Arkham's basement is similar to the main plot of the 2005 film Batman Begins, the only major difference being that the Scarecrow was working with Ra's al Ghul, the plot's true mastermind.
- Part of the scene where Batman sees hallucinations of the Joker resembles a scene from the scrapped Joel Schumacher film Batman Triumphant.
- Whilst the Joker's first laugh in this episode sounds like Mark Hamill's portrayal, the second and third sound are far too high-pitched. Either Hamill's voice was edited, or another voice actor stepped in.
- This plot may have been based on the storyline The Last Arkham, in which Batman commits himself to Arkham Asylum to investigate a series of grisly murders, only to be imprisoned by asylum administrator Jeremiah Arkham, who believes Batman to be truly insane.
- When Batman is shown being wheeled in on a stretcher, he raves, "Robin... look out... Joker's got a bomb!" This is a reference to Jason Todd, the second Robin in the comic book series, who was killed by a bomb set by the Joker.
- A hallucination by Batman resembles The Mask.
- In one scene Dr. Bartholomew refers to The Joker as Jack Napier, which hints at his portrayal in Tim Burton's 1989 Batman movie.
- Dr. Bartholomew could be a reference to Dr. Bartholomew Wolper, the doctor that treated the Joker and Two-Face in Frank Miller's Batman: The Dark Knight Returns.
- Scarecrow does indeed have a new mask in this episode (though it is not much different from the previous one). The new mask does have some differences from the previous mask; it has a slightly different stitch job, the hair is also combed and much neater than before, the eye slits are smaller and the eyes therefore take up more room and the teeth are slightly smaller. The mask is also tighter than before and has a smaller jaw and is much less awkwardly large then before.
- Scarecrow's tone of voice is once again altered, it sounds more like a calmer version of his previous tone (giving him a more criminal like voice). After this episode the tone of voice falls back upon the college professor tone. Scarecrow wears the new mask for the remainder of the series until the revamp occurs.
- This episode was featured on the VHS The Adventures of Batman and Robin: Batman along with "Beware the Gray Ghost".
- Batman thought he saw the Joker in the Batcave. Ironically, Batman brought him inside his Batcave in the series Batman: The Brave and the Bold episode "Game Over for Owlman!".