After the death of Babydoll's mother, Baby's stepfather discovers from their mother's will that his wife left everything to her two daughters. Apparently enraged that he worked so hard to marry the woman (and perhaps engineered her death) only to be left nothing, he gets a bottle of Paradise rum and drinks (Paradise is reoccuring theme in the movie - be it an idea, commodities or objects in general). He gets so drunk that he heads for the girls' rooms, and just as Baby is leaving her sister's room, he decides to attack Baby and possibly try to rape her. He doesn't succeed and then turns his sights on Baby's sister. He locks Baby in her room and then moves in on his youngest stepdaughter.
Baby, in a panic-stricken state, escapes her temporary "holding cell" by climbing out her window and finds her stepfather's Colt .45 pistol. Baby stops her stepfather just as he breaks into the closet where her sister has locked herself. Scared at seeing Baby with a gun, he tries to reason with her, but she fires one round that misses entirely and takes out the lightbulb in the closet. A second shot grazes his left forearm, however, the bullet ricochets off a steam pipe, and then fatally strikes her little sister.
Baby rushes to her sister and cries over the body, horrified at what she had done. Scared and angry, she stalks over to her stepfather who (presumably) was trying to call the police. She aims the gun at him, but is so upset at what just happened she drops the gun and flees the house. Her stepfather successfully calls the police, who arrest the distraught Baby at her mother's grave. She is injected with something by EMT's and then taken to the Lennox House for the Mentally Insane.
Her stepfather has framed Baby for the murder of her sister, and conspires with the corrupt head orderly, Blue Jones, to forge Dr. Gorski's signature in order to have Baby lobotomized so that she cannot reveal the truth about the circumstances leading up to her sister's demise, hence the title of the movie; Sucker Punch.
There are five days before the doctor arrives to perform the procedure on her. During that time in the asylum, Baby retreats into a fantasy world in which she is newly arrived in a brothel operated by Blue, whom she envisions as a mobster. While there, she befriends four other dancers: sisters Sweet Pea and Rocket, Amber and Blondie.
Dr. Vera Gorski (now going by the moniker of Madame Gorski within the first level of fantasy) encourages Babydoll to perform an erotic dance like the other girls, during which Baby further fantasizes she is in feudal Japan, meeting the Wise Man for the fiirst time. She tells him she wants to escape, so he presents her with weapons and five objects she needs in order to escape: a map, fire, a knife, a key, and an unrevealed item that will require "deep sacrifice" but bring a "perfect victory". He gives her one last piece of advice before he ushers her out the door into the waiting blades of three demonic samurai; she must defend herself. Taking her newly acquired sword in hand, she fights. Once she bests all three warriors, her fantasy ends and she is brought back to the brothel level of fantasy, her dance impressing everyone including Blue.
At this point Baby has retreated deeply into her own psyche and we as the audience do not get the true asylum reality of what really occurs during this scene and are therefore left to our own fantasies as to what actually happens to trigger this fantasy within Baby.
Later, while still within the first level of Baby's fantasy (the brothel), she tells the girls she has a plan to escape, Rocket is all for it but her sister Sweet Pea flatly rejects Baby's plan, saying no one has ever managed to escape before. Blondie says the last three girls who tried died in the attempt (foreshadowing the deaths of 3 of the girls). Nontheless, Baby tells them that they need to find a map, something to start a fire with, a knife, and a key, all four of which she saw when she first walked into Lennox House. She tells them that when she dances, everyone will be so distracted that no one will notice the girls stealing the tools they need. After some convincing, the girls join her in her quest to acheive freedom. First they must get the map with all the exits marked on it, which Sweet Pea has volunteered to steal from Blue Jones's office. Baby begins to dance, transporting herself into a deeper level of a fantasy world mirroring Sweet Pea's theft. In her illusion, the Wise Man informs the girls that the map is in a German bunker on the far side of "no-man's land" (a WWI trench warfare reference) guarded by undead steampunk WWI soldiers. After some spectacular fighting and a timely rescue by Amber, the girls secure the map and Baby is brought back to the brothel once again.
Next, the girls must find a way to make fire in order to force an employee of the asylum to pull the fire alarm which will automatically open all the doors in Lennox House. The Mayor (Amber's client), has a cigar lighter that will suffice nicely. Unfortunately it is kept in the man's breast pocket, and he is not a handsome fellow by a long shot. Amber doesn't think she is brave enough to swipe it from him, but, as Blondie tells her, he is her client. "Just kiss him on the neck and slip your hand down his chest into the pocket", is Blondie's advice to her. Gathering her courage, Amber agrees and Baby dances for the first time onstage. This time her fantasy is of an orc-infested castle guarding a young dragon and its mother. Inside the baby dragon's throat are two rocks that when struck togethher will create the most awesome fire the girls will ever see. To Rocket's dismay, they'll have to slit the baby dragon's throat in order to "reach inside" and retrieve the stones. The Wise Man warns them not to wake its mother and sends them on their mission. Rocket, Sweet Pea, and Babydoll storm the castle from the ground while Amber and Blondie take to the sky in a highly modified WWII B-17 bomber. Once they find the little dragon and slay it, Baby strikes the stones together, producing a magnificent fire. Unfortunately that fire wakes up the mother dragon, and she is not happy to find her baby dead. The girls run for their lives as Amber leads the mother away with her plane. After a bit of chasing Big Momma Dragon bites off the part of the aircraft that held Blondie's gun, causing Amber to lead the dragon back to Babydoll et al, saying that the firebreathing lizard is all hers. Babydoll swiftly jumps the jet of flame the mother shot at her and stabs the dragon in the head, completing their mission.
Back in their dressing room, the girls celebrate Amber's bravery in getting the lighter and taking one more step closer to freedom. Blue breaks in on their little celebration (pesumably because he heard their jubilation), asking why they are so happy. Sweet Pea explains that they are glad Baby did so well on her first time onstage, which can be frightening. Blue is all smiles but is not at all convinced, instead lightly-but-threatingly accusing the girls, specifically Sweet Pea and Amber, of messing with his stuff and stealing little trinkets from clients. He advances towards Baby, saying that if she wasn't about to make him lots of money dancing for a man they call the High Roller (a rich man who will buy Babydoll's virginity in her fantasy but in reality is the doctor who will perform the lobotomy)... Blue leaves the threat hanging while we, the audience, are left reminded of his obvious brutality.
With time running out, Baby knows they must hurry. The next item up is the Cook's kitchen knife. Sweet Pea and Rocket agree to do this, even though the large, temperamental cook had previously harmed Rocket physically and attempted to rape her before Baby came to her rescue. Amber, Rocket, Sweet Pea, and Babydoll all work in the kitchen waiting for Blondie and Madame Gorski to set up the music. As the clock ticks and the two don't show, the girls start anyway. Rocket sits on the cook's lap to seduce him as the others tune his personal radio to more suitable music, spilling a bucket of pealed potatoes in water near the radio wire in the process. Baby starts to dance once more, creating another illusion and once again going deeper into her fantasy. This time the mission is to deactivate and capture a massive bomb set to go off when a futuristic train it's on reaches city limits. Sweet Pea, Rocket, and Babydoll handle this mission, shooting every robot set to guard the bomb. They successfully manage to deactivate the bomb with four minutes to go, hook it up to Amber's helicopter, and are nearly ready to leave when a robot that was blasted in half regains use of its arms and presses the big bad button overriding the deactivation procedure. Suddenly brought back to the kitchen, Baby sees that the radio wire had shorted out in the spilled water, messing with the radio, turning it off and back on again in quick bursts. The Cook snaps back to attention just as Sweet Pea grabs the knife from his belt. He shoves Rocket off of him and angrily takes out another knife, intending to stab Sweet Pea, but before he can Rocket knocks her aside, taking the blade meant for her sister in the ribs. As the knife comes down Baby suddenly snaps back to the fantasy and the bomb on the train. She has managed to get on the helicopter's ladder, but Sweet Pea and Rocket are still down below. There is no more time to try to deactivate the bomb again, so Rocket presses a button on her elder sister's jacket, activating a jet pack to send her off into the sky and safety while Rocket stays behind to see if there is anything she can do. Sweet Pea screams her little sister's name as the huge bomb explodes ending the second level of fantasy. Back in the kitchen, Sweet Pea takes her mortally wounded sister in her arms while the others are frozen with shock. With her dying breath Rocket asks her sister that, when Sweet Pea gets home, to tell their mother that Rocket loves her. Sweet Pea promises, and Rocket dies somewhat peacefully. Blue Jones bursts in at that moment and, seeing one of his girls dead, angrily shouts at the "inbred" cook, snaps at his bodyguards to lock the hysterical Sweet Pea in a closet, and yells at the remaining girls to get ready for their show. Despite all this Amber manages to claim the knife.
Meanwhile Blondie is crying in the dance room, clearly distraught at the events that just unfolded. Madame Gorski finds her sobbing on the ground and tries to comfort her, asking Blondie to tell her what's wrong. Before she can, Blue interrupts though we do not know for sure that it's Blue until later. He interrogates the badly upset Blondie, and finds out about the the girls' plan to escape.
On the eve of Baby's last performance, Blue decides to make examples of what happens when people try to escape and "break the foundation of trust." In the dressing room he rants on about how he tries to give all his girls the good life and he does, so he says. It breaks his heart to have his girls conspire against him. Try to escape even. Madame Gorski attempts to calm him down but he strikes her instead. To her credit, she stands right back up and continues to try to soothe him. He presses a gun to her throat and asks her what is it she does, to which she viciously replies "I teach them... to survive... you." He very nearly shoots her, but to everyone else's relief he doesn't. Amber starts stammering out excuses, terrified to her very bones, but Blue calmly says that it's okay. He nonchalantly walks behind Amber and shoots her in the back of the head to the horror of the other girls and Madame Gorski. A terribly guilty and scared Blondie tells the girls she is sorry as Blue informs them that Blondie told him the plan. He appreciates her tip off but says no one likes a snitch, and kills her too. He has the bodies disposed of and sends everyone out of the dressing room except Baby. He comes close to Baby, and compares his job to a sandbox: he is sitting at the edge of the sandbox while everyone else gets to play with his toys. But not this time. This time he's going to take his toys, and go home. He then tries to rape Baby, but she grabs the knife they had stolen earlier and stabs Blue on the left side of his neck. Stunned, he sinks to the floor. She strongly tells him that he will never get her, and yanks the master key from around his neck. She runs to free Sweet Pea from the utility closet, who asks where Amber and Blondie are. Sadly, Baby states that it's just her and Sweet Pea now. They have all the items at this point, and so initiate the escape plan. They create a fire using a molotov cocktail in a Paradise Rum bottle, and wait for someone to pull the fire alarm, unlocking the doors. All is going according to plan until they see Blue's men at the front gate. Sweet Pea, visibly shaking, is distressed to find their way blocked and despairs, but Baby concludes that she is the fifth item. It is not her story after all - it is Sweet Pea's. She tells her friend that she will walk out and create a distraction so Sweet Pea can escape. Baby tells her to tell her mother what Rocket said, and that Sweet Pea will have to live for all of them now, after all, she is the only one who can fit into the outside world as she's the only one who still has a life. Quelling Sweet Pea's protests, Baby walks out into the open in full view of Blue's men. Sharing a final look with Sweet Pea as the latter sneaks out the front gate, Baby kicks one of the men very hard in the crotch.
Soon after, Baby is lobotomized. The Doctor asks Dr. Vera Gorski, "What did she do to deserve this?" Saying that the look in Baby's eyes just as he did it... it was almost as if she wanted it to happen. Dr. Gorski says that Baby caused a lot of problems in the one week that she was at Lennox House, including setting a fire and stabbing an orderly, but Vera wouldn't have done a lobotomy as a solution. Confused, the doctor says that she signed the order authorizing the procedure, but Dr. Vera says that's not true. The Doctor shows Dr. Vera the signature he was given, but she quickly recognizes it as a forgery. Meanwhile Blue Jones and his "bodyguards" lead a lobotomized Baby to a cell where she will be kept. The bodyguards are uneasy, saying they don't like hurting girls and they won't do it any longer, but Blue screams at them to put Baby in the chair and to shut the door. Alone with Baby, Blue kneels close to her. He softly complains to Baby that she has lost herself, and that she's not allowed to lose herself until he says so. Leaning closer, he kisses her. The kiss is broken when police bust open the door, Dr. Vera Gorski at their side. They swiftly arrest a clearly insane Blue as he yells about how he takes care of the girls and that nothing was done to Baby - just look at her face! He struggles and shouts that he will use the bribe the Stepfather gave him to lower his sentence. An officer shines a light on Baby, asking if she is okay. The camera turns to Baby's face for the first time since the lobotomy, revealing a blank expression but she very slightly smiles, suggesting that Babydoll is not completely lost and is now trapped(sic?) in her own fantasies from this point on - a paradise if you will.