James Sunderland has arrived in the town of Silent Hill after receiving a letter from his wife, Mary, despite the fact that she had died of a terminal illness three years ago. The letter claims that Mary is waiting for James in their "special place", which confuses James, as the entire town of Silent Hill was their "special place", but he ultimately decides to head towards Rosewater Park. After leaving the observation platform of the town and traveling towards Silent Hill, James crosses the Toluca cemetery and meets Angela Orosco, a teenager who came to the town looking for her mother, brother, and father. When James arrives in Silent Hill, he discovers it is not the same beautiful town it was in the past. Besides the strange pervasive fog, the entire town appears to be deteriorated and abandoned. Grotesque monsters, barely humanoid, are wandering the streets and attempting to attack James whenever possible. When he discovers that the road to his first destination, Rosewater Park, is blocked, James decides to travel through an apartment complex to reach what he believes could be the "special place" that Mary mentioned in her letter.

Woodside apartments

Once inside the apartments, James encounters a small girl who steps on his hand and runs away. Shortly after, he meets Pyramid Head, a humanoid monster whose head is completely obscured by a giant pyramidal metal helmet that protects against anything in James's inventory. James later encounters an obese young man, Eddie Dombrowski, while vomiting in one of the apartment bathrooms. Eddie responds very defensively to James's questions about a corpse in the apartment's refrigerator. After this, James encounters Angela again, who is contemplating suicide while lying on the ground with a knife in her hand in front of a large mirror. James convinces her to hand over the knife for her own safety, after which she flees in unusual panic.

When James finally arrives at Rosewater Park, he meets a woman named Maria, who looks almost identical to his deceased wife, Mary, but dressed in more provocative attire and with a more insolent attitude. During their travels, she reveals things that only he or Mary would know, and acts in a very seductive manner toward James. Maria accompanies James in his attempt to reach his second supposed "special place", the Lakeview Hotel. James enters Pete's Bowl-O-Rama, where he encounters Eddie again. Then, the girl appears once more, fleeing when James sees her. Eddie reveals to James that her name is Laura. Outside, Maria claims to have seen Laura and, out of concern for her, tells James to try to follow her. Their search leads them to Brookhaven Hospital, where Maria becomes ill and insists on resting in one of the rooms there.

Laura on one of the city's streets

James finds Laura in one of the rooms, but becomes angry with her because she claims to have known Mary since last year, in clear contradiction with his belief that she died three years ago. After this, Laura locks him in a room full of monsters hanging in cages (the Flesh Lips), under the pretense that his wife's letter was there. After defeating them, the hospital undergoes a dramatic sudden change towards the Other World, where James returns to the hospital room to discover that Maria is no longer there. James subsequently finds Maria in the hospital basement, but Maria becomes furious, claiming that James had abandoned her. After calming down, she insists on finding Laura. Pyramid Head appears again and pursues James and Maria through the hospital basement. Pyramid Head succeeds in killing Maria as they try to escape through an elevator. Once again alone and saddened by Maria's loss, James decides to refocus on his original objective of his search for Mary. He leaves the hospital and finds a key buried beneath a statue in Rosewater Park, which leads him to the Silent Hill Historical Society.
Mariacell Maria in the Labyrinth.
The Silent Hill Historical Society actually contains two levels that are not visible on the town map: Toluca Prison and the Labyrinth, where Pyramid Head resides. In this area, James finds Maria, miraculously alive and locked in a prison cell, which surprises him with memories of Mary. He tells her he will get her out of there, but upon leaving and then returning to enter the cell, James discovers that she has been murdered once again. The next area, where James reunites with Angela, provides the story of why Angela and Eddie are in the town. A newspaper clipping indicates that Angela killed her father, who abused her with her mother's complicity. James saves Angela from a monstrous manifestation of her father, but then she becomes hostile toward James. It is revealed that Eddie suffered years of verbal abuse from his peers. He killed a football player's dog and then shot the owner in the leg. It also becomes clear that upon his arrival in Silent Hill, he went mad, seeing everyone as if they were mocking him, and resorted to killing anyone he encountered. The first time, he attempts to explain the bodies he has left during his stay in Silent Hill, but ultimately becomes an enemy of James as well, and James is forced to kill him in order to continue. James feels regretful about killing Eddie, and after this point, James questions his understanding of the events that led to his arrival in the town. Furthermore, the letter he supposedly received from Mary goes blank, indicating that the letter itself was something James's own mind created, and that it never actually existed in the first place.
James manages to escape the Labyrinth and rows by boat to Lakeview Hotel, hoping to find Mary. Once there, he encounters Laura once more, and she gives him the letter from which she supposedly lied to James about earlier; it reveals that Mary wanted to adopt her, which at the same time confirms Laura's claims about knowing Mary since last year. The final truth is shown to James when he sees a video tape that he apparently left at the hotel three years ago, which demonstrates that he killed his wife, who suffered from a terminal illness, by suffocating her with a pillow. Laura, who was ready to leave town, encounters James and he reveals the truth to her. Laura becomes angry with him for having killed Mary, and then silently leaves the room. On the radio that James has been carrying, which warned him of the presence of monsters, a message from Mary sounds, asking him to find her. James explores the rest of the hotel, discovering that it is now completely damp and rotting, and appears to be nothing more than the remains of a building that had previously burned due to fire. James finds Angela on a set of stairs engulfed in flames, and she asks him to return the knife so she can commit suicide. James refuses to give it to her. When Angela goes up the stairs, James tells her that the room is surprisingly hot, to which she responds that it has always been that way for her, meaning her life has always been hell. She then goes completely up the stairs and disappears into the flames.
LM-SH2Pictures001 James finds Mary at the top of the stairs.
The ending approaches, James finds another resurrected Maria, bound and screaming for help, but she is quickly killed by two Pyramid Heads. James realizes they were created to punish him for his sins, and promptly confronts them. After they become severely weakened, they commit suicide with their own spears, indicating that their purpose has been fulfilled. James crosses a hallway where he hears a previous conversation between him and Mary, when she was still alive; in this conversation, James gives her some flowers, but she doesn't accept them, claiming that she is too repugnant to deserve flowers and angrily yells at James. At the end of this conversation, Mary desperately pleads with James to stay with her. James enters a large metallic complex with a long staircase. At the top of the stairs, he encounters a woman (depending on the ending, the woman can be Maria or Mary) who transforms into a manifestation of Mary's pain. After James defeats her, the game comes to an end and one of the following endings is shown.