In a post-apocalyptic future, Cable (Josh Brolin) breaks into a government facility and steals a temporal displacement device, in order to travel back in time to kill the mutant who will one day murder his family. The device is damaged and can only perform one more time jump, which Cable intends to use to return to the future after completing his mission.
In New York City, Deadpool (Ryan Reynolds) is attacked by rival mercenaries, and his girlfriend Vanessa Carslyle (Morena Baccarin) is killed in the crossfire. Colossus (Stefan Kapicic) and Negasonic Teenage Warhead (Brianna Hildebrand) console him and once again invite him to join the X-Men. Deadpool begrudgingly accompanies them on a mission to rescue Rusty Collins (Julian Dennison), a mutant boy with pyrokinetic powers who is being abused at a boys home. Deadpool intervenes when the orderlies begin torturing Rusty, and the two end up being arrested by the government and locked up in a mutant prison called the Icebox, where they are forced to wear inhibitor collars that neutralize their powers.
Deadpool and Rusty bond as they antagonize cell block "king" Black Tom Cassidy (Jack Kesy). Cable later breaks into the Icebox to kill Rusty, who will grow up to become a vicious mutant criminal known as Fire Fist and kill hundreds of innocents, including Cables family. Cables attack causes a riot, during which Cassidy is killed, and Deadpool is forced to leave Rusty behind in order to escape. Inspired by Vanessas memory, Deadpool later assembles a team formed by Domino (Zazie Beets), Bridge (Terry Crews), Zeitgeist (Alexander Skarsgard) and Shatterstar (Lewis Tran) to intercept a prison convoy transporting Rusty, but Bridge, Zeitgeist and Shatterstar are unexpectedly killed in a botched parachute landing, while Deadpool and Domino fight Cable. Rusty manages to escape and, believing Deadpool to have abandoned him, joins forces with another prisoner, the Juggernaut, to destroy the boys home.
Unable to defeat the Juggernaut on his own, Cable joins forces with Deadpool and Domino. He remains determined to kill Rusty, claiming that the boys home massacre is the beginning of Rustys criminal career, but Deadpool is convinced that he can change Rustys future. The Juggernaut nearly kills them before Colossus and Negasonic Teenage Warhead arrive to help and defeat the Juggernaut by shoving a power cable up his ass and throwing him into a river, where he is electrocuted.
Deadpool confronts Rusty and urges him to stop his rampage. He puts on the inhibitor collar and challenges Rusty to prove he is evil by killing him first. Rusty hesitates, but Cable shoots him anyway. Deadpool takes the bullet and dies in Rustys arms. His sacrifice causes Rusty to realize the error of his ways, and changes the future.
Feeling responsible for Deadpools death, Cable uses his last time jump to return a few hours back in time and arrange for Deadpool to be wearing a token from Vanessa that ends up saving him from Cables bullet. Rusty is welcomed into the Xavier School for Gifted Youngsters, and Deadpool and Cable earn each others respects.
In a series of post-credits scenes, Negasonic Teenage Warhead repairs the temporal displacement device, which Deadpool uses to prevent Vanessas death. After they are reunited, he also uses it to kill baby Hitler, his X-MEN ORIGINS: WOLVERINE counterpart and Ryan Reynolds before he signs on to GREEN LANTERN.
The movie begins with a voice-over narration in which Deadpool complains that LOGAN stole its R-rating from him, so he's stealing LOGAN's idea of having the hero die in the end to protect a kid.
Deadpool's team is the X-Force (because "X-Men" is sexist). Deadpool and Weasel hold open auditions and end up choosing Domino, Bridge, Zeitgeist, Shatterstar and a guy named Jim, who is not even a mutant. During the botched parachute landing, Shatterstar is shredded by a helicopter, Bridge lands on a freeway and is run over by a truck, and Zeitgeist is trapped in a woodchipper. Jim actually makes the landing, but gets sprayed by Zeitgeist's acid blood while trying to pull him out.
Cable says his backstory is "complicated". He's born in a post-apocalyptic future where mutants are nearly extinct, and received bionic implants after being injured fighting in the war between humans and mutants. He had a wife and a daughter named Hope, who were murdered by the adult Fire Fist, and carries Hope's teddy bear with him as a reminder of what he is fighting for.
When Deadpool visits the X-Mansion, he once again complains there's no other X-Men around. As he does, the X-MEN: APOCALYPSE cast (Tye Sheridan's Cyclops, Sophie Turner's Jean Grey, Alexandra Shipp's Storm, Kodi Smit-McPhree's Nightcrawler and Evan Peters' Quicksilver) are seen hanging out in a room. They notice that Deadpool is around and close the door before he notices they're there.
When Domino introduces herself as having "luck powers", Weasel quips that's lazy enough to come from a guy who can't draw feet.
Negasonic Teenage Warhead is openly lesbian and has an Asian mutant girlfriend who helps her and Colossus fight the Juggernaut.