The film begins with Harry Potter and his cousin Dudley mysteriously attacked by two Dementors. Harry casts the Patronus charm to repel the Dementors, but soon after the Ministry of Magic detect his underage wizardry and inform him that he has been expelled from Hogwarts. After experiencing horrible nightmares depicting Lord Voldemort's return, Harry is awoken by the arrival of an advance guard of wizards, including Mad-Eye Moody, who escorts him to headquarters of the Order of the Phoenix, a secret organization founded by Dumbledore. Members of the Order, including Harry's Godfather Sirius Black, reveal that under the Ministry's influence, the The Daily Prophet has launched a smear campaign against anyone who claims the Dark Lord has returned, leaving Harry feeling isolated and betrayed by the wizarding community.

Entering his fifth year at Hogwarts, Harry learns that the Minister for Magic Cornelius Fudge has appointed a new Defence Against the Dark Arts teacher: Dolores Umbridge, a Senior Ministry official who refuses to teach practical magic to her students, out of fear that Dumbledore will organise his own personal wizard army. As Umbridge's control over the school increases, Ron and Hermione aid Harry in forming a secret defence group, calling themselves "Dumbledore's Army".

During the year, Harry envisions mysterious scenes in his sleep, including a dangerous attack upon Arthur Weasley in the Department of Mysteries. Fearing there may be a connection between Voldemort and Harry's mind, Professor Snape immediately initiates Occlumency lessons to close his mind from the Dark Lord's influence.

Promoted to High Inquisitor, Umbridge, Filch and her loyal Inquisitorial Squad, including Draco Malfoy uncover Dumbledore's Army after interrogating one of the students, Cho Chang with whom Harry had developed intense feelings for. Dumbledore is questioned and makes an impressive escape as Fudge orders for his arrest. With Dumbledore gone, Umbridge becomes the new Headmistress whose sinister dominance over the school continues.

During an O.W.L. exam, Fred and George launch a firework display causing chaos for Umbridge; as the students cheer joyously outside, Harry suffers a vision of Sirius trapped within the bowels of the Ministry. Umbridge, soon after, catches the trio attempting to use the Floo Network and begins interrogating Harry. Hermione leads Umbridge into the Forbidden Forest in search of a faux weapon when a herd of centaurs emerge and carry the Headmistress into the darkness. Finding Ron and other DA members, Luna Lovegood, Neville Longbottom and Ginny Weasley, they fly to London by winged-horses named Thestrals.

Arriving at the Ministry, the six enter the Department of Mysteries where they uncover a prophecy named after Harry. Transfixed, they soon become ambushed by Death Eaters, including Lucius Malfoy and Bellatrix Lestrange, Sirius' deranged cousin. A battle erupts as the Death Eaters try to stop the students from escaping, resulting in Sirius' death at Bellatrix's hand. Back in the Atrium, Harry corners Bellatrix where he struggles with his desire to enact the Cruciatus curse. Voldemort himself appears, ready to kill Harry when Dumbledore emerges.

A brief but furious duel takes place, in which Bellatrix escapes through the Floo Network. When Voldemort disappears, and the battle seems over, Harry suddenly finds himself being possessed -- recalling images of his past, of his family and his friends. Seeing Ron and Hermione across the hall, Harry resists and rebuffs Voldemort, calling the Dark Lord weak. Before Voldemort can kill Harry, Ministry officials, including Fudge, arrive via the Floo Network, finding the Dark Lord with their own eyes. Voldemort promptly disappears.

In the aftermath, the Ministry is forced to end their smear campaign and Umbridge is removed from Hogwarts awaiting a formal investigation. Dumbledore explains that he had attempted to distance himself from Harry all year, hoping it would bring less risk as Voldemort would not try to invade his mind. The film ends as Harry tells his friends that they have one thing Voldemort doesn't: something worth fighting for.