Tabuu's armada has been taking over worlds across the universe. In a last-ditch attempt to stop him the Smash Brothers, led by Mario(Superman), Link(Batman), Mega Man (Cyborg) and Samus (Wonder Woman) call in every hero they can, as well as Bowser (Lex Luthor), who claims that he's changed his ways.
The team sets off on their mission, but is shocked to find that Tabuu's new minions are significantly more difficult to defeat. To the shock of everyone, many heroes die, it's a slaughter as heroes are turned into mere trophies for Tabuu. Tabuu has won. He's successfully taken over the Subspace Emissary.
Two years later, Bowser has become the emissary to Lord Tabuu himself. Link has been brainwashed to blindly follow Tabuu as Dark Link. Tabuu has discovered an item called the "Smash Ball" at the center of the Earth. If he gets it, he will be unstoppable. Two drilling devices have been stationed in key locations to acquire the Smash Ball.
Samus now leads a squad of brainwashed heroes powerful enough to be of use to Tabuu. And everyone blames Mario for failing. Mario was tortured by Tabuu. He can no longer use any powerups. He's just one hit away from game over. Keeping him company is Marth (Raven) a young hero who is unsure of his place in Tabuu's world.
The two seek out Simon Belmont (Constantine) in the hopes that he can help him. They find him drunk with his new buddy Pac-Man (Etrigan). Despite Belmont's reluctance, the team wants to find the last remnant of Link's legacy: Princess Zelda (Damian). She has since become an assassin named Shiek, leading the survivors of Hyrule. Shiek reveals that she was able to keep Link's former ally Marth (Nightwing) alive, but he hasn't been doing well.
Meanwhile, Princess Peach (Lois Lane) leads a small resistance group consisting of former villains King K. Rool, Mewtwo, Wolf, Ridley, and King Dedede (The Suicide Squad) as part of Mario's plan to take back the universe. Other surviving heroes are successful in destroying a drill, so now it's down to Peach and Mario's teams to save the day.
Bowser betrays Tabuu, buying Peach more time. Mario's team encounters Dark Link, as well as Samus' team of brainwashed heroes. However, Samus manages to remembers who she is, and is able to turn her team against Tabuu.
Inside Tabuu's keep, Simon Belmont finds Sonic the Hedgehog (The Flash) running on a treadmill, powering the keep. Simon helps Sonic to his feet, and while healing him he finds out about Sonic's time travelling powers and his incident when he tried to save his mother's life.
They try to run but are confronted by a brainwashed Mega Man, who is in charge of Tabuu's technology. Mega Man is turned to the light as well, but things aren't going so well for Mario.
Shiek tries to reason with Link, but Link kills her. With her dying words, Shiek tells Link "You are still the Hero of Time." which finally sets Link free. In a fit of vengeance, Link duels Tabuu head-on with the rest of the team.
Things take a turn for the worse when Tabuu's minions finally overrun Peach's team. They are killed as Peach says her final farewell to Mario.
Having to watch this from Tabuu's lair, Mario begins to glow gold, and becomes invincible, taking on Tabuu, but it's not enough. Pac-Man, watching the battle, decides to take action, growing to a huge size, and taking out Tabuu once and for all. As the heroes defeat Tabuu for the last time, Mega Man orders Tabuu's planet to self destruct, with Pac-Man still on the surface.
Having finally been freed from Tabuu's rule, the remaining heroes return only to find that the other drill is still operating, and the Smash Ball is still going to explode. But Simon Belmont tells Sonic what he needs to do. Sonic needs to run so fast that he rewrites time itself.
Sonic is afraid of altering time again, but Simon gives Sonic one of Pac-Man's last cherries and tells him to go save the world. Mario, Link, Samus, and the last of the Smash Brothers watch as Sonic heads off to give the world a new Genesis.