The game begins with Iron Man (voiced by Eric Loomis) defending the Dataspine, an archived version of J.A.R.V.I.S. (Andrew Chaikin), from attackers. However, an EMP bomb is dropped, disabling him. Three hours earlier, Tony Stark had recorded a journal message in which he mentions the Roxxon Energy Corporation, and how they tried to duplicate the Iron Man armor without success. Tony is then interrupted by James "Rhodey" Rhodes (Don Cheadle), who says that there is trouble at Stark Archives. Following the EMP bomb, the power reserves in Iron Man's armor activate, and upon recovering, Iron Man learns that Roxxon is behind the attack. He grimly decides that he should destroy the Dataspine to keep Roxxon from getting the archives. Outside, Rhodey, in his War Machine armor, intercepts some Roxxon Dropships.
Iron Man makes contact with S.H.I.E.L.D. director Nick Fury (Samuel L. Jackson), who informs him that separatists under the command of a General Shatalov (Dimitri Diatchenko) have seized control of a Tesla facility. During Iron Man's escort of S.H.I.E.L.D. helicopter forces, they are attacked by a battle platform called the Roxxon Armiger. After destroying it, Iron Man and War Machine head to a battlecruiser and destroy it, learning the Armiger was remote-controlled. They discover that Shatalov is working with the terrorist group Advanced Idea Mechanics to create the Crimson Dynamo suit. Upon learning that the suit is being developed at a power plant in Siberia, Fury reveals that he has sent Natasha Romanoff (Catherine Campion), the Black Widow, to spy on the plant.
At the plant, Shatalov makes contact with A.I.M.'s Kearson DeWitt (Doug Boyd), who tells him that there is a spy in his ranks, displeased that he has brought S.H.I.E.L.D. to their front door. Shatalov gives orders to prep the Crimson Dynamo armor and then informs his men that their connection with A.I.M. is now severed. Iron Man finds and protects Natasha from Shatalov's men and a S.H.I.E.L.D. transport is sent to their location. Natasha is extracted while Iron Man and War Machine battle Shatalov in his Crimson Dynamo armor. The defeated Shatalov reveals that A.I.M. was behind the theft of J.A.R.V.I.S.'s AI, and are planning to use it to create Ultimo.
The team learns that Kearson DeWitt was behind the attack led by Shatalov and that he had previously worked at Stark's Theoretical Weapons Division until Stark shut it down. Aside from DeWitt working on the prototype of the arc reactor, Pepper Potts (Meredith Monroe) also reveals that he had a secret project called PROTEAN. Inside an A.I.M. base, DeWitt uses his PROTEAN technology to merge with an enormous metal suit and become Ultimo. With the merge complete, DeWitt has his men upgraded with PROTEAN implants. Arriving at the base, War Machine battles PROTEAN drones while Iron Man searches for DeWitt. J.A.R.V.I.S. detects Ultimo shortly after the base is secured with help from S.H.I.E.L.D.
Meanwhile, the S.H.I.E.L.D. helicarrier is attacked, and Iron Man protects it from DeWitt's drones. When War Machine defeats an Arc Armiger dropped on the helicarrier, Iron Man decides to reprogram it. Using the reprogrammed Armiger, Iron Man and War Machine assault an A.I.M. base in Malaysia. When the giant Ultimo arrives, War Machine disables some of its arc reactors while Iron Man fights the DeWitt/Ultimo within. Upon defeating DeWitt/Ultimo, Iron Man learns that the effects on DeWitt are irreversible. War Machine finishes Ultimo off while the helicarrier rams it. Afterward, J.A.R.V.I.S. tells Stark to promise him never to let anyone gain access to his programming again