Tony Stark recalls a New Years Eve party in 1999 where he meets scientist Maya Hansen, the inventor of Extremis, an experimental regenerative treatment intended to allow recovery from crippling injuries. Disabled scientist Aldrich Killian offers them a place in his company Advanced Idea Mechanics, but Stark rejects the offer, humiliating Killian. Years later, Stark’s experiences during the alien invasion of New York are giving him panic attacks. Restless, he has built several dozen Iron Man suits, creating friction with his girlfriend Pepper Potts. Meanwhile, a string of bombings by a terrorist known only as the Mandarin has left intelligence agencies bewildered by a lack of forensic evidence. Stark’s security chief Happy Hogan is badly injured in a Mandarin attack, causing Stark to issue a televised threat to the Mandarin, who responds by destroying Stark’s home with helicopter gunships. Hansen, who came to warn Stark, survives the attack along with Potts. Stark escapes in an Iron Man suit, which his artificial intelligence J.A.R.V.I.S. pilots to rural Tennessee, following a flight plan from Stark’s investigation into the Mandarin. Stark’s experimental armor lacks sufficient power to return to California, and the world believes him dead.
Teaming with Harley, a precocious 10-year-old boy, Stark investigates the remains of a local explosion bearing the hallmarks of a Mandarin attack. He discovers the “bombings” were triggered by soldiers subjected to Extremis, which at this stage of development can cause certain subjects to explosively reject it. After veterans started exploding, these explosions were falsely attributed to a terrorist plot in order to cover up Extremis’s flaws. Stark witnesses Extremis firsthand when Mandarin agents Brandt and Savin attack him.