Wade Wilson is a New York City mercenary—a.k.a. he roughs up bad guys for a quick and relatively easy buck. At his favorite bar, Sister Margaret's School for Wayward Girls, he meets a prostitute named Vanessa and they strike up a relationship. Shortly after Wade and Vanessa get engaged, Wade is diagnosed with late-stage cancer. He leaves Vanessa in the middle of the night, claiming that it's to spare her from the pain of his cancer battle.
That night at Sister Margaret's, Wade's friend (and bartender) Weasel tells Wade that there's a mysterious recruiter waiting for him. The recruiter says that the people he works for will not only cure Wade's cancer, but also turn him into a superhero. Wade initially declines on the grounds that heroism isn't his cup of tea, but later changes his mind.
Wade is rolled into a grimy workshop on a gurney, home to a project known as Weapon X. Ajax is in charge, and he explains that he's going to stress Wade until it either kills him or activates his dormant mutant DNA, which will bring any extraordinary abilities Wade might have to the forefront, as well as cure his cancer. As Ajax tortures Wade, it becomes clear that Ajax is a sadist and his motives are uh, murky.
After several days of torture, Wade's mutant DNA is triggered. It cures his cancer and mutant abilities…but also leaves him horribly disfigured. Ajax decides to torture Wade further, just because he can. After Ajax leaves, Wade sets the building on fire in order to escape and pursues Ajax. Ajax manages to hold Wade off by promising that he can fix his face; then he impales Wade on a post in the burning building and leaves him to die.
One of his mutant abilities is regeneration. Now, it's nearly impossible for him to die, and he has a single mission: Find Ajax. To cover his gnarly appearance, Wade fashions a costume, including a full mask, and reinvents himself as Deadpool. He moves into an apartment with an elderly woman named Blind Al, and begins working his way through Ajax's organization, trying to track down Ajax. All the while, Wade doesn't tell Vanessa that he's alive for fear of her reaction when she sees his new look.
After killing several of Ajax's low-level thugs, Deadpool meets the recruiter again, and he tells Deadpool where to find Ajax. Deadpool intercepts their convoy as they charge down the highway, causing a massive collision and maximum carnage. Colossus sees this on the news, and he and his protégé, Negasonic Teenage Warhead, travel to the scene of the accident to apprehend Deadpool—and recruit him for the X-Men. While Colossus gives Deadpool his pitch, Ajax escapes from Deadpool. Deadpool then escapes from Colossus.
Ajax goes to Sister Margaret's and spots a photo of Wade and Vanessa that Weasel tacked up behind the bar. Ajax then kidnaps Vanessa and takes her to an abandoned shipyard that boasts a massive, decaying ship. Aided by Colossus and Negasonic Teenage Warhead, Deadpool battles Ajax, who's backed up by his right-hand woman, Angel Dust, and a team of armed thugs. Deadpool and Ajax face off once again, and when Deadpool has Ajax down for the count, Ajax reveals that there's no cure for Deadpool's disfigurement; he was lying the whole time. Just as Deadpool is about to kill Ajax, Colossus tells him not to; he urges Deadpool to make the heroic decision to spare Ajax's life. Deadpool shoots Ajax in the head.
Lastly, Deadpool has to deal with Vanessa. She's more than a little bit ticked that her fiancé has been alive this whole time without telling her. Deadpool removes his mask, and while Vanessa is taken aback by his appearance at first, she quickly tells Wade she doesn't care, and that she'll get used to it. They make out amidst the rubble while Deadpool plays Wham's "Careless Whisper" on his phone.