In Kathmandu, Nepal, a group of rogue sorcerers infiltrate the Kamar-Taj, an enclave that is known only to the Masters of the Mystic Arts. After beheading the librarian, the group's leader Kaecilius steals a forbidden ritual from a book owned by his former mentor, the Ancient One. As the Zealots escape through a portal to London, the Sorcerer Supreme traps them in a Mirror Dimension that is invisible to the public. She takes down several Zealots but fails to stop Kaecilius and his surviving followers from escaping with the ritual.

In New York City, Stephen Strange is an acclaimed doctor and neurosurgeon working at Metro-General Hospital, but is also very arrogant and cares only for the wealth and success his talents bring. One night, as he travels to give a guest talk, he is involved in a car crash after diverting his attention from the road. Although he survives, his hands are badly injured, necessitating the insertion of metal pins into them. As a result, they continuously tremble, leaving Strange barely able to write his name, ending his career. His former lover and co-worker Christine Palmer tries to help him move on, but Strange is desperate to heal his injuries and harshly orders her to leave him alone.

After months trying experimental surgeries on his hands, using up all his money and resources, Strange seeks out Jonathan Pangborn, a paraplegic who mysteriously was able to walk again. Pangborn directs Strange to the secret compound Kamar-Taj, where he is taken in by another sorcerer under the Ancient One, Karl Mordo. The Ancient One shows Strange her power, revealing the Astral Plane and other dimensions such as the Mirror Dimension. Strange begs her to teach him, and she eventually agrees despite his arrogance, which reminds her of Kaecilius.

Strange begins his tutelage under the Ancient One and Mordo, and learns from the ancient books in the library which is now protected by the master Wong. It is explained that Earth is protected from other dimensions by a spell formed from three buildings called Sanctums, found in New York City, London, and Hong Kong. The task of the sorcerers is to protect the Sanctums, though Pangborn chose to forgo this responsibility in favor of channeling energy into walking again; Strange will have to decide between regaining the use of his hands and defending the world.

Strange advances quickly over several months, even secretly reading from the forbidden texts and learning to bend time with the mystical Eye of Agamotto. Mordo and Wong warn Strange against using such power and breaking the laws of nature, comparing his arrogant yearning for power to that of Kaecilius, who believes that everyone should live as long as the Ancient One after the deaths of his loved ones.

Kaecilius and his followers use the stolen pages to begin summoning the powerful Dormammu of the Dark Dimension, where time does not exist and all can live forever. To ensure Dormammu's arrival, Kaecilius and his followers begin targeting the sanctums, firstly destroying the London Sanctum, which accidentally sends Strange from Kamar-Taj to the New York Sanctum. Kaecilius and the Zealots then clash there, where Strange holds them off with the mystical Cloak of Levitation until Mordo and the Ancient One arrive.

Strange and Mordo become disillusioned with the Ancient One after Kaecilius reveals that her long life has come from her own use of Dormammu's power. Kaecilius mortally wounds the Ancient One, and escapes to Hong Kong. The Ancient One tells Strange that he too will have to break the rules, to balance out Mordo's steadfast nature, before dying despite the best efforts of Strange and a bewildered Palmer.

Strange and Mordo arrive in Hong Kong to find Wong dead and the Sanctum destroyed, with the Dark Dimension already engulfing Earth. Strange uses the Eye to turn back time and save Wong, before creating an infinite time loop inside the Dark Dimension that traps himself and Dormammu in the same moment forever. After killing Strange many times to no avail, Dormammu reluctantly agrees to leave Earth if Strange breaks the loop, taking Kaecilius and his Zealots with him, which grants them their immortality, but at a horrific cost.

Disgusted by Strange and the Ancient One's disregard for the consequences of defying nature, Mordo severs all ties to Kamar-Taj and departs on his own. Strange soon returns the Eye, which Wong calls an Infinity Stone, to Kamar-Taj, and then takes up residence in the New York Sanctum to continue his studies.

Sometime later, Strange is visited there by Thor, who has brought his brother Loki to Earth to search for their father Odin. Elsewhere, Mordo visits Pangborn and steals the energy he uses to walk, stating his intention to stop the continued misuse of power by Earth's sorcerers.