Obadiah Stane tried to get his scientists to make a smaller version of the Arc Reactor. However they failed, so Stane broke into Tony Stark's Mansion and temporarily paralyzed him with a Sonic Taser. Stane pulled out the power source from Stark's heart, taunting him all the while. After he departed, Stark realized his only hope for survival was the preserved Arc Reactor that Pepper Potts gave him in a display case. He struggled to get the power source but managed to get it installed as James Rhodes arrived.
Potts, Phil Coulson, and several S.H.I.E.L.D. agents arrived at Stane's research lab at Stark Industries Headquarters. They spotted the Mark I Armor and a storage location where something else was kept. Just then, a gigantic robotic suit came to life and attacked them: it was Stane in his suit, code-named the Iron Monger. Stane took out three S.H.I.E.L.D. agents and chased Pepper to the parking lot.
Rhodes watched Stark suit up, awestruck at the Iron Man armor. As his friend flew away, Rhodes looked at the prototype flight suit Stark built earlier, thinking he should use it to help him. He then decided against it but mused that would be a second chance to do so. J.A.R.V.I.S. warned Stark that he had only about half power in the suit, the older power source was not designed to work alongside the newer suit.
Iron Man arrived and attacked Iron Monger, leading both of them to fight on the highway. Stane attempted to kill Iron Man with a car full of civilians, however, Stark managed to disarm him and safely place the car down, although he was injured in the process. Stane recovered and overpowered Iron Man with his armor's superior strength in addition to his own armor quickly losing its strength.
Iron Man theorized that while Obadiah's suit was more powerful than his, since it was reverse-engineered from the Mark I, it likely had the same icing problem as the Mark II. Iron Man attempted to fly as high as possible to lure Iron Monger into chasing him and reaching the altitude that would freeze the armor. Stark's theory proved to be correct, and Iron Monger crashed into the Stark Industries Headquarters building, while Iron Man fell moments after running out of power. However, Iron Monger somehow recovered and the two clashed again.
Running out of ideas, Stark instructed Pepper Potts to overload the building's Arc Reactor, in order to generate a shockwave strong enough to knock out the Iron Monger's suit. Stark tried to buy Pepper time by damaging Iron Monger's targeting system, but in the process got himself cornered up in the roof and lost the armor's helmet. Blinding Stane to open up the Iron Monger suit's cockpit, Stark dodged away from the shoot out as Stane's targeting system was malfunctioning.
Stark begged Pepper to blow up the roof. Pepper hesitated, believing that Stark would also be killed, but reluctantly pushed the master button. The Arc released a powerful blast of electricity, knocking out Stane and injuring Stark. An unconscious Iron Monger then fell into the reactor which exploded, killing Stane. The energy wave from the Reactor also managed to re-charge Stark's heart battery, saving him from death.
Tony Stark and James Rhodes were taken to a S.H.I.E.L.D. facility where Phil Coulson taught Stark how to fight when in battle. Days later, Rhodes held a press conference about the incident. Stark was impressed with the newspaper's coming up with the name "Iron Man" and planned to adopt it despite pointing out that it's technically incorrect as the suit is not made of Iron. Coulson released cover stories on Obadiah Stane and the "truth" about Iron Man, who was referred to as Stark's personal bodyguard.
Stark went before the reporters once more and prepared to comply with the cover story. However, it quickly became clear that this version of events made little sense, and Christine Everhart debunked the story before Stark had a chance to present it. In response, Stark threw away his notes and declared the truth: "I am Iron Man."