Freddy Krueger is rendered powerless in Hell with Springwood forgetting him. Disguised as Pamela Voorhees, Freddy manipulates Jason Voorhees into killing Springwood teenagers to regain strength.
Lori Campbell lives with her widowed father, with friends Kia, Gibb, Trey, and Blake staying over. That night, Jason stabs Trey and folds him in half, with police suspecting Freddy. Following a nightmare, Blake awakens to his beheaded father before Jason kills him. The next day, police state it to be a murder-suicide, hoping to contain Freddy.
Lori's ex-boyfriend Will Rollins and friend Mark Davis are Westin Hills Psychiatric Hospital patients. They take Hypnocil to suppress dreams, due to them having the last contact with Freddy. A news report leads Mark to devise an escape plan. He and Will return to Springwood to tell Lori about Freddy. Mark later learns of the city's plan to eradicate Freddy and realizes they've nullified it. That night, Lori and the others attend a rave at a cornfield. A drunken Gibb believes she sees Trey and follows him to a silo - a dream trap set by Freddy. However, Jason kills her. Dismayed, Freddy realizes Jason's rampage will continue and deny Freddy victims.
Linderman and stoner Freeburg escape the rave along with Will, Lori and Kia. Lori confronts her father about her mother's death, lying to him. She and Will go to Mark's house, only to discover Freddy killing Mark. Deputy Stubbs suspects a copycat Jason murderer, but his suspicions fall short. He approaches Lori and her friends, who piece together Freddy's plan. Learning of Hypnocil, they attempt to steal stock from Westin Hills, but Freddy possesses Freeburg and disposes of them. After electrocuting Stubbs, Jason is tranquilized by possessed-Freeburg, who Jason bisects before falling unconscious.
The teens devise a plan to pull Freddy from the dream world into reality and force him to fight Jason. They take the unconscious Jason to Crystal Lake. Meanwhile, Freddy battles Jason in the dream world. Freddy is in his environment and has the advantage with his dream powers but despite impaling Jason with his own machete, beating him, brutally slamming him around the plant and using equipment to crush him, Jason keeps coming. However after Freddy is thrown onto a pipe which begins to release water, he learns Jason is afraid of it on account of drowning, which allows Freddy to try that exact same means of death to kill him. Lori goes to sleep and saves Jason but Freddy attacks her, revealing himself as her mother's killer.
Jason awakens due to Lori and chases the others into a cabin. Linderman is mortally wounded and dies, the cabin ignites, and Lori is awakened, pulling Freddy into real life which shocks Freddy and reveals his own fear of fire as it was the method in which he was originally killed. Jason fights Freddy while they escape, throwing Freddy through another cabin's roof.
Lori, Will and Kia encounter Freddy. Kia distracts Freddy by taunting him until Jason suddenly kills her. As Lori and Will escape, the two begin to fight. Freddy uses his speed and intellect to his advantage, while Jason uses his strength and tolerance to extreme forms of attack. The fight starts first in a construction area, then on the dock in Crystal Lake. There, Jason tears Freddy's arm off after Freddy stabs Jason's eyes with his glove. Lori and Will pour gasoline on the docks and set it on fire, which ignites propane tanks that blows Freddy and Jason into the lake. Freddy climbs out and attempts to kill Lori and Will, but is impaled by Jason with his own clawed arm as Lori decapitates Freddy, causing his body to fall back into the lake. Lori and Will leave Crystal Lake together. Afterward, Jason emerges from the water, holding his machete and Freddy's severed head as Freddy winks to the audience before laughing off-screen.
Zack Ward makes an appearance as Bobby Davis, Mark's older brother. A then-unknown Evangeline Lilly has a brief walk-on role as a high school student, and professional wrestler Óscar Gutiérrez, better known by his ring name Rey Mysterio, briefly serves as Englund's stunt double for a sequence set in Freddy Krueger's iconic boiler room lair. New Line Cinema studio chief Robert Shaye, who served a producer on the every preceding Nightmare on Elm Street film, appears as the school principal, credited as L.E. Moko.
Influenced by fans' desire for a crossover film depicting a fight between the two icons, New Line and Paramount tried to make a Freddy vs. Jason movie in 1987. But the two studios failed to agree on a story. When Jason Takes Manhattan failed to perform successfully at the box office, Sean Cunningham decided that he wanted to reacquire the rights to Friday the 13th and start working with New Line Cinema on Freddy vs. Jason, as New Line owned Nightmare on Elm Street. The concept of a fight between Freddy and Jason was not new; Paramount had approached New Line about filming a crossover years before the latter had gained the licensing rights to Friday the 13th. At that time, both companies wanted the license to the other's character so that they could control the making of the film. Negotiations on the project were never finalized, which led Paramount to make The New Blood. After Jason Takes Manhattan was released in 1989 the rights reverted to Scuderi, Minasian, and Barsamianto, who sold them to New Line. Before Cunningham could start working on Freddy vs. Jason, Wes Craven returned to New Line to make New Nightmare. This effectively put Freddy vs. Jason on hold, but allowed Cunningham the chance to bring Jason back into the spotlight with Jason Goes to Hell: The Final Friday. The ninth installment "turned a healthy profit", though it was only intended to open the door for a crossover with Freddy Krueger, rather than start a new series for New Line. Ultimately, the film series would go through another sequel before that would happen. Cunningham's "frustration" with the delayed development of the Freddy vs. Jason project forced him to create another sequel in an effort to keep the series in the minds of audiences. Based on Jason Takes Manhattan's concept of taking Jason away from Crystal Lake, the tenth film would put the titular character in space. The film suffered from the loss of its biggest supporter, President of Production Michael De Luca, when he resigned from his position. Lack of support forced the finished film to sit for two years before finally being released on April 26, 2002; it would go on to become the lowest grossing film in the series at the domestic box office; it also held the distinction of having the largest budget of any of the previous films at that time.
According to writers Mark Swift and Damian Shannon, several endings were considered for the film. One of the unused endings involved Pinhead of the Hellraiser franchise; however, New Line was discontent with securing the rights to the character.
New Line believed Freddy vs. Jason needed a fresh start, and chose a new actor for Jason. Cunningham disagreed with their decision, believing Hodder was the best choice for the role. Hodder did receive the script for Freddy vs. Jason, and had a meeting with director Ronny Yu and New Line executives, but Matthew Barry and Yu felt the role should be recast to fit Yu's image of Jason. According to Hodder, New Line failed to provide him with a reason for the recasting, but Yu has explained he wanted a slower, more deliberate Jason, and less of the aggressive movements that Hodder had used in the previous films. Yu and development executive Jeff Katz recognized the outcry among fans over the replacement of Hodder as Jason, but stood by their choice in recasting. The role eventually went to Ken Kirzinger, a Canadian stuntman who worked on Jason Takes Manhattan. There are conflicting reports over the reason Kirzinger was cast. According to Yu, Kirzinger was hired because he was taller than Robert Englund, the actor who portrays Freddy Krueger. Kirzinger stands 6' 5" (196 cm), compared to the 6' 3" (191 cm) of Kane Hodder. Yu wanted a much larger actor to tower over the 5' 9" (175 cm) Englund. Kirzinger believes his experience on Part VIII helped him land the part, as Kirzinger doubled for Hodder on two scenes for the film, but also believes he was simply sized up and handed the job. Although he was hired by the crew, New Line did not officially cast Kirzinger until first seeing him on film. Kirzinger's first scene was Jason walking down Elm Street. New Line wanted a specific movement in Jason's walk; Kirzinger met their expectations and signed a contract with the studio. Even though Hodder expresses some resentment at not being chosen, he and Kirzinger are still good friends. However, even Kirzinger did not perform the role throughout the entire film. In the final scene where Jason emerges from the water holding Freddy's head in his hand, the role was played by another actor, 6'5" (196 cm) Douglas Tait. Almost a year after originally auditioning for Yu, Tait was called in for the reshoot of the climactic closing sequence.
Regarding Hodder, Yu says it was ultimately New Line's decision to exclude Hodder, not his. Many of the New Line executives working on the film persist on stating that excluding Hodder was Yu's idea.
In an interview, Tait explained the reason for the reshoot. He said, "Unfortunately for me, it was the only scene I was hired to do. The test audiences were confused about the original ending, they thought Jason Ritter’s character was becoming Freddy[sic]. You can see it in the deleted scenes, that is why they decided to reshoot the ending. Originally I was being considered for playing the role of Jason in the entire film. It was actually between me and Ken. When they took the film to Canada, I was out of luck. There was no way they were going to pay for my flight and hotel stay when Ken was a local. Also, Ken is older than me and he was a lot more established in the business than I was at the time." Describing the scene, Tait said "I was on the film for a couple days. The water sequence took a lot of preparation. They realized that when I got wet, I looked too skinny in the clothes, so they had to bulk me up with pads and extra clothing so it would look like I was still big. Being with all this extra weight, one eye covered, a machete in one hand, Freddy’s head in another hand, and being totally submerged in water, made that scene very difficult. Also, Ronny Yu wanted me to walk like I was walking on land. He wanted it to look like I could walk through the water without it making me rise to the surface. To do this effect, they had a rope tied under water that I held onto with my left hand (with Freddy’s severed head in it also), and I held myself down on the ground so I could pull myself and walk forward."
Publishing company Black Flame released a novelization of the film on July 29, 2003.
The film was released on VHS and DVD as part of New Line's Platinum Series on January 13, 2004. The DVD release featured a second disc of bonus content that included: audio commentary by Ronny Yu, Ken Kirzinger, and Robert Englund, deleted and alternate scenes with commentary, Ill Niño's music video to "How Can I Live", trailers and TV spots, soundtrack promo and behind the scenes featurettes.
The film was released on UMD on October 4, 2005 and on Blu-ray September 8, 2009. The Blu-ray contained the same features as the original Platinum Edition DVD. The film was also released as part of a 9-disc pack of all twelve Friday the 13th films on Blu-ray and a Triple Feature Blu-ray pack with the Friday and Nightmare remakes.
On Rotten Tomatoes, the film has an approval rating of 41% based on 153 reviews and an average rating of 4.8/10. The site's critical consensus reads, "Fans of the two horror franchises will enjoy this showdown. But for everyone else, it's the same old slice and dice". On Metacritic, which assigns a normalized rating to reviews from mainstream critics, the film has an average score of 37 out of 100 based on 29 reviews, indicating "generally unfavorable reviews".
Doug Chapman and Melvin Martinez were nominated for the Best Fire Stunt in the Taurus World Stunt Awards 2004 for the double full body burn and wire stunt. Doug Chapman doubled for Robert Englund as Freddy and Glenn Ennis doubled for Ken Kirzinger as Jason in the stunt.