Peter Parker, secretly the superhero Spider-Man, is estranged from both love interest Mary Jane “M.J.” Watson and best friend Harry Osborn, and additionally discovers his Aunt May is facing eviction. He also finds himself suffering temporary, but reoccurring losses of his powers, often in life-threatening situations.
Harry, now head of Oscorp’s research division, is sponsoring a fusion power project by nuclear scientist Otto Octavius’, who befriends and mentors Peter. While handling hazardous materials, Octavius wears a harness of powerful robotic tentacle arms with artificial intelligence. During a public demonstration that Peter and Harry attend, a power spike causes the fusion reactor to destabilize. Octavius refuses to shut down the reactor, which goes critical — killing his wife and burning the inhibitor chip blocking the arms from his nervous system. Peter shuts the experiment down, destroying it in the process.
At a hospital, doctors prepare to surgically remove Octavius’ harness. However, without the inhibitor chip the arms have developed sentience and attack them. Upon regaining consciousness and seeing the carnage, Octavius escapes and takes refuge at a harbor. Becoming increasingly influenced by the arms’ AI, he robs a bank in order to fund a second experiment. Peter and May coincidentally are there, and Octavius takes May hostage. Peter rescues her, but Octavius flees with stolen money. The Daily Bugle subsequently dubs the scientist Doctor Octopus.
Mary Jane becomes engaged to astronaut John Jameson, son of Bugle publisher J. Jonah Jameson. Peter suffers an emotional breakdown over his inability to balance his life, resulting in him losing his powers. He abandons his Spider-Man identity, returns to his normal life, and attempts to reconcile with Mary Jane. A garbageman brings Peter’s Spider-Man costume to Jameson, who takes credit for driving Spider-Man into hiding. Peter tells May the truth behind his Uncle Ben’s death and how he is responsible. May forgives him, but the rise in New York City crime rate worries Peter.
Requiring the isotope tritium to fuel his reactor, Octavius visits Harry to demand it. Harry agrees in exchange for Spider-Man’s life. He tells Octavius to seek Peter, who Harry believes is friends with Spider-Man, but requests Octavius not harm him. Octavius locates Peter, tells him to find Spider-Man, and captures Mary Jane. Her endangerment leads to Peter’s powers resurfacing. Just as Jameson admits he was wrong about Spider-Man, Peter steals his costume back from the Bugle and goes after Octavius.