On Christmas Eve in 1955, the adolescent Hellboy (Montse Ribé) is preparing for bed and requests a bedtime story from his father, Professor Bruttenholm (John Hurt). The professor tells Hellboy a legend about war between the humans and the people of the mystical realm. King Balor, leader of the magic elfin race, commissioned the creation of a "Golden Army," 70 times 70 magical mechanical soldiers. Balor received a crown that would allow him (or anyone with royal blood) to command the Army.
The Golden Army attacked the humans with no mercy, and eventually Balor became consumed by regret. A truce was called between the warring factors; humans were given control of the cities while Balor's elves would keep to the forests. As a peace offering, Balor shattered his crown and gave one piece to the humans (still keeping two for himself). One of the few who did not agree with the truce was Balor's son, Prince Nuada. The Prince went into exile, vowing to return when his people needed him. And the Golden Army became dormant.
In the present day, a mysterious albino man (Luke Goss) is practicing swordsmanship. It is Prince Nuada, ready to return from exile. He is joined by the monster known as Mr. Wink (Brian Steele) who follows his commands. A prestigious auction house is selling off several rare artifacts, including the humans' fragment of the Golden crown. Nuada arrives, takes the crown fragment and dispatches several mysterious creatures to dispose of the humans.
At the Bureau for Paranormal Research and Defense, Agent Tom Manning (Jeffrey Tambor) has a meeting with Abe Sapien (Doug Jones). Manning is still mad at Hellboy; the B.P.R.D. is still an undercover organization yet Hellboy continues to let himself be seen in public. Abe explains that Hellboy's relationship with Liz Sherman is "tense" at the moment, which may be causing Hellboy's erratic behavior.
At that moment, Hellboy (Ron Perlman) is blasted through the wall of his room; his pyrokinetic girlfriend Liz (Selma Blair) has become extremely angry and used her fire powers to send him flying. Hellboy's team is called to investigate the incident at the auction house. Manning gives Hellboy a pack of Cuban cigars as a bribe in one last attempt to persuade Hellboy to be discreet in his work.
At the auction house Hellboy & the others learn that there are no survivors from the 70+ guests reported to be there. Abe searches through texts to find what might have caused such an attack. He finds boxes marked with a Royal Seal and uncovers an example of what the boxes might have contained: small, winged creatures known as "tooth fairies" because they feed on calcium.
While using his psychic talents to try and find the creatures, Abe brings his hand close to Liz and senses that she is pregnant. Hellboy and his fellow agents are suddenly swarmed by the ravenous tooth fairies. Liz activates her fire powers to incinerate the creatures. The resulting battle sends Hellboy outside and in full view of news reporters. The BPRD is officially exposed to the world.
Meanwhile, Prince Nuada and Mr. Wink come to speak with King Balor (Roy Dotrice). Balor is content to let the truce between humans stand, and his daughter Nuala (Nuada's twin sister) (Anna Walton) is in agreement. But Prince Nuada feels that humans are insatiably greedy and will soon force the mystical creatures into extinction.
Hellboy watches news reports about himself and the other agents on the evening news. Hellboy is delighted by all of it but Liz (secretly taking a pregnancy test) is furious about Hellboy making them public because she hates people "staring at her." Tom Manning tells Hellboy that Washington is sending down a new BPRD agent as a result of Hellboy's latest actions. Hellboy is less than thrilled.
Balor and Nuada continue their argument. Nuada refuses to back down; he will do whatever is necessary to make the magical world safe from humans. Nuada kills his father and takes the second piece of the crown. Nuala flees from her brother with the third and final piece.
Everyone at BPRD is awaiting the arrival of their new agent, Johann Krauss (voiced by Seth MacFarlane). Krauss turns out to be a very strange entity; a containment suit proportioned like a man holding pure ectoplasmic energy. Krauss inspects the remains of one tooth fairy. He injects it with a sample of ectoplasmic energy to temporarily return the creature to life so they might learn more.
Krauss translates the creature's speak; it remembers troll languages and other commerce sounds. Johann realizes that the creatures came from the legendary Troll Market, a gathering place for magical creatures. Rumors suggest that the Troll Market might be located under the Brooklyn Bridge so Krauss takes the team to search for it.
Johann Krauss outfits the team with special time-dilation glasses that allow them to see through illusions put out by magical entities. They end up spotting a creature called a "fragglewump" who leads them right to the door of the Troll Market. Upon entering, Hellboy is delighted -- he can walk among the Market's creatures and not feel like a freak or outsider.
Abe spots a hooded figure walking away and wearing the same sort of Royal Seal he found with the tooth fairies, so he goes to investigate on his own. The figure is Princess Nuala, who arrives at the Market's library to receive a cylinder hidden by her father. Abe follows her in and she confronts him. Nuala is revealed to have the same sort of psychic powers as Abe.
They both learn about one another through hand gestures. At that moment, Mr. Wink comes in and attacks Nuala. Abe encourages her to flee while Hellboy fights Wink. After an intense fight, Hellboy proves victorious.
They speak with Princess Nuala, who explains that she has the last piece of her fathers' crown and the cylinder from the library which contains a map to the location of the Golden Army. Krauss is worried about bringing the princess back to BPRD because of regulations, but Hellboy argues against him. Prince Nuada arrives soon after, furious at the loss of his companion. He releases a small seed, which Hellboy scoffs at.
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