Lego Batman: The Videogame is notable for being the first Traveller's Tales Lego game to have an original plot. Unlike previous Traveller's Tales LEGO games, it's based more on the concept of a franchise, rather than following the plot of a particular movie or other story from it. The game features Batman and Robin fighting crime and villainy in Gotham City. Batman's most dangerous and murderous foes have all escaped from Arkham Asylum and divided themselves into three groups of five, each led by a "clever" and well-known villain with plans to achieve a personal goal:

Riddler is after the city savings in the Gotham Gold Reserves. He is aided by Clayface, Mr. Freeze, Poison Ivy, and Two-Face.
Penguin plans to seize control of Gotham using remote-controlled penguin robots. He is aided by Bane, Killer Croc, Man-Bat, and Catwoman.
Joker intends to blow up the cathedral and spread his deadly laughing gas across Gotham. He is aided by Harley Quinn, Scarecrow, Mad Hatter, and Killer Moth.
Each group is accompanied by hundreds of thugs and small timers who murder and steal under their orders. Each group member also has a specific set of goons that are tailored to their crimes.

The villain missions mainly show how the villains set up their plans, while the heroes show the fates and outcome of the villains and their sadistic plots. The general pattern in each story is that the leaders often leave their associates at the hands of Batman or the police once their use is over. Eventually, Batman & Robin disrupt all their plans and send all the villains back to Arkham. The Riddler is captured due to the clues he leaves behind, Penguin's robots and equipment are destroyed, and the Joker fails to detonate the bombs. The last scenes show most of the villains being oddly content to be back in Arkham except for the Joker, Penguin, and Riddler as their plans have failed.

Batman and Robin fly across the city once more, making sure the city of Gotham is safe. The game ends. less