The storyline was inspired by the Blackest Night Series and the animation Green Lantern: First Flight
Opening scenes reveal flashback scenes from the first film, with some additional narrative, as follows:
"Long before the formation of the Green Lantern Corps, the Guardians of the Universe sought to bring order to the universe by using an android police force called the Manhunters. They were fearsome and intimidating, but the Guardians control them, for the time being. Then a programming glitch in the system of the Manhunters caused them to go on a rampage in Sector 666, killing all known living creatures.
Only five inhabitants were able to survive the onslaught, and they blame the Guardians for not being able to control their Manhunters, thus they seek revenge on them instead.. They called themselves the Inversions, and their leader was Atrocitus.
Over the years, their attempt on attacking the Guardians at Oa were continuously quelched, until they learned of another force existing in the emotional spectrum, the red color of rage. Later they were able to harness the red color of rage and have built a fortress in the Ysmault sector. Using their new red power they were able to reconstruct the Manhunters, feeding them with the new-found force. The Manhunters began their series of attacks on other sectors without thought, while Atrocitus and his new legion which he called Red Lanterns start mapping out plans for domination of the known galaxy. While they have no rings to act as conduit of their new energy, anger in the universe, enhanced by a mandatory blood-shedding sacrifice by a Red Lantern recruit, enables napalm-like plasma to be projected through the mouth.
With the Manhunters out of their control, the Guardians begin to harness the emerald energy coming from will power, believing it is the only force that is could help them achieve order in the universe. A group of female Oans opposed them, believing that emotion and not just will power, should also be harnessed and not left behind. The female Oans left the planet and inhabited the remote planet of Zamaron where they started to slowly learn and harness the purple energy of emotion."
Flashback continues with the selection of Hal Jordan (Ryan Reynolds again) as the first Green Lantern from Earth. We see the battle between him and Hector Hammond, and then with Parallax. Then the sequence in which Sinestro (Mark Strong) wears the yellow ring and his costume changes. At the same time, some yellow fragments of energy seem to crystallize in the Lost Sector of Planet Ryut, where Parallax was held in prison before.
Fast track to the present, Hal Jordan and Sinestro lead a small contingent of Lanterns in stopping a rebellion in one of the planets in sector 2813, the sector of Tomar Re (Geoffrey Rush). Jordan still receives orders from Sinestro concerning their mission. Sinestro appears out of focus during the siege and most of the time appear ruthless and unforgiving during their assignemnt.. The battle was intense and furious. Tomar Re asks Jordan to lead in the evacuation of the inhabitants while Sinestro and Re handle the invaders. Jordan was up to the task, using his will power to move all of the citizens in a safer place, then he aides his fellow Lanterns. When the smoke was cleared, most of the planets was destroyed. Jordan was left with some of the Lanterns to help Re investigate the cause of the rebellion, while Sinestro was summoned back to Oa.
The Earth sector was reeling from the effects of the attack of Parallax in Coast City. John Stewart (David Ramsay of Arrow) is an ex-marine who was caught in the middle of the attack, and he is now assisting residents. Carol Ferris (Blake Lively) is also there, along with her staff at Ferris Aircraft doing medical and other relief services. Jordan returns to Earth to help out as Hal. John and Hal are introduced to each other.
Back at Oa, Tomar Re reported to the Guardians that the rebellion was caused by the Manhunters, and that they were led by a Red Lantern named Atrocitus. Sinestro, who was summoned, asked the Guardians for more information on Atrocitus. Ganthet of the Guardians warned Sinestro that his behavior as a GL Corps leader is unbecoming, mentioning some of his abuses. Sinestro seeks audience with the Guardians and Appa Ali Apsa asks for the yellow ring, which Sinestro reluctantly gives back. Sinestro leaves the chamber and the Guardians went into deep discussion. Ganthet insisted that the Corps be fortified by having additional recruit for every sector. He reminded them of what Parallax has done and the only way to prevent that from ever happening is to have many members of the Corps, to be trained. Sayd, the lone female Guardian in the citadel agreed, but stressed out on the GL Corps role as peace keepers as being examples of the peace they are supposed to uphold
In the outskirts of Sector 1817, the sector of Sinestro, Atrocitus lead another attack with his Manhunters, The Guardians sent Kilowog and Boddika, but not Sinestro. Sinestro was furious as it was his home planet Korugar in the Sector 1817, but the Guardians insist that Sinestro was not in his right mind to lead an assault. Jordan was also made aware of the Manhunters and he also went to the sector. Sinestro then slowly began to feel hate towards the Guardians and fear for his home sector. Evidently the yellow ring seemed to have been summoned unconsciously by Sinestro’s fear. He then removes his old ring and charged to Korugar, using his yellow energy.
The GL Corps had a hard time battling the Manhunters, as they were now enhanced with the red energy of rage from the Red Lanterns. Jordan found this out and he focused his attack on the Red Lanterns, subduing them. Atrocitus and some of the Manhunters escaped, vowing revenge on Jordan and the GL Corps. Sinestro saw the devastation in Korugar, while Jordan and the Corps were surprised with Sinestro’s new look. “I am still a Green Lantern, but this power summoned me” he later explains. Jordan did not agree and asks Sinestro to surrender the yellow ring. A fight ensued and Jordan and the Corps managed to subdue Sinestro and lead him back to Oa.
After the defeat at the hands of the GL Corps, Atrocitus sought out to know more about the new Lantern, Jordan. He learns he is from Sector 2814, from Earth. He said to his Manhunters, “we will strike Earth next”.
Back on Earth, sightings of a flying alien man, vigilantes working in the shadows of corrupt cities, and new unchartered islands in South America inhabited by women were dismissed by Dr. Amanda Waller, head of project CADMUS, a special division created by the Office of the President created for genetic engineering purposes. She quickly dispels the rumors and sightings as mere attempts of the press to divert attention from the main news, the forthcoming US Presidential Elections. However, she asked her staff to continue investigating on the matter.
In Oa, the Guardians stripped Sinestro of his duties as the GL Corps leader and installed Kilowog ass the new GL corps leader with Jordan and Re as his assistants. Sinestro went to Korugar with the thought of rebuilding the planet and gather supporters to overthrow the Corps and Jordan. He instantly feels the connection with him and the yellow ring and he again gets the ring, but does not wear it until he reached his sector. He then began to form alliances in his home planet and decides to enter the anti-universe, where the Qwards, the arch enemies of the Guardians, live. They created a yellow Central Battery for Sinestro for which he can use. During his visit, he learns from the Qwards that the emerald energy of will power was not the strongest force in existence, for in it lies a natural weakness for the color yellow, and what it represents, fear. More than ever, Sinestro’s loathing for the Guardians grew.
The Guardians learn of Sinestro’s plan of building an army of his own but is not aware of the impending attack of Atrocitus on Earth. They summoned Jordan, Kilowog and Tomar Re to the chamber and revealed for the first time the emotional spectrum: green for will power, yellow for fear, red for rage, purple for compassion, blue for peace, orange for avarice and black for death. Ganthet warns them that many beings will constantly threaten the universe by seeking the different forces that exists and that the Corps have to uphold order in the universe no matter what the cost is. Suddenly Jordan’s and Kilowog’s rings flash. Kilowog’s ring warns of an attack at Oa by Sinestro and he assembles his Corps. Jordan’s ring warns of an alien invasion on Earth. They quickly prepare even as the Guardians set up their defense around the planet Oa.
Jordan arrives to find most of his Coast City, California being attacked. The outskirts of the city lie in ruins, with only a handful of brave contingent from the National Guard keeping the attackers at bay. At the forefront of the attack by the Manhunters is Atrocitus . Stewart is there leading a small contingent to lead the citizens to safety. From the skies above, we see fighter planes begin the assault on the Manhunters. Jordan looks up to see Carol Ferris in her Star Sapphire-labelled jet moving around and targetting missles at the Manhunters, who easily overpower them. Atrocitus stopped the aerial assault, and Ferris was hurt and narrowly escapes, Jordan scoops Ferris out of danger as the aircraft exploded. Ferris is left unconscious but alive. Jordan then joins the fray, battling the Manhunters one at a time until he faces Atrocitus. During their fight, Atrocitus revealed their story to Jordan. The Manhunters were destroyed and Atrocitus was captured and sent to Oa. Jordan however stayed and took care of reconstructing Coast City. He talks to Stewart, thanks for his help again and leaves to bring Ferris and the rest of the injured to a nearby hospital.
The attack on Oa by an army of Korugars lead by Sinestro was ill prepared and many of them were captured and brought to justice, Sinestro included. When Atrocitus was brought by Kilowog, Sinestro became enraged and he kills Atrocitus. Everyone, including the Guardians, were shocked by what Sinestro did, and tried to subdue him but his power ring has immunity over the will-powered green rings. He leaves many Corps member dead, including Tomar Re.
Jordan was made aware of what happened to Oa and he flies to put an end to Sinestro. They met in space and an epic battle ensues. Both of them mortally wounded. Sinestro fled back to the anti-universe while Jordan uses his last energy to summon his power battery from his home, recharges himself and goes to Oa.
In the aftermath of the devastation, we see the Zamarons being befriended by Sinestro, John Stewart being selected as another Earth Green Lantern, and a report of an underwater city. In the hospital, a jewel box was placed near the bedside of the still injured Carol Ferris with a note saying “Greetings, Star Sapphire”. Meanwhile, members of the Red Lanterns pay tribute to their fallen leader Atrocitus and now are seeking audience to the God who lives in a planet whose energy is fueled by hellspores.