Clayface has arrived in theaters, and in a Gotham City without Batman, the spotlight is placed squarely on actor Matt Hagen. Everything is going his way, and he's on track to win his first Oscar, but one drunken night out changes everything for him.
After sleeping with a beautiful girl called Mia, Matt wakes up surrounded by gangsters and Gotham City wiseguy Markos Szabo. Livid that the actor slept with his girl, Szabo and his men carve Matt's face up and, to discredit him, tell the press that he drugged and raped Mia. As Matt undergoes surgery after surgery to fix his destroyed face, he attempts to find justice in civil court, but Szabo has paid off the jury, and Matt loses his entire fortune and his reputation.
Fortunately, he comes across a scientist, Dr. Caitlyn Corr, who specialises in experimental AI-powered nanotechnology that could potentially heal him.
After some back-and-forth, she agrees to experiment on him, and it works. Matt crashes a premiere, but under an intense moment of stress, his face begins to collapse. Any upset causes his face to fall apart, and, determined not to lose his good looks, the actor overdoses on Caitlyn's nanobots and initially seems fine.
Things quickly escalate, and one by one, Matt masters his shapeshifting abilities and murders the people who crossed him (the lawyer who betrayed him to Szabo and an old acting friend are among his first victims). They're all pretty deserving of their deaths, and things come to a head in the gangster's nightclub, where Matt uses his Clayface powers to wipe out Szabo, his men, and Mia in brutal fashion.
However, something seems to snap in Matt when Corr's GCPD fiancé, John Borrelli, visits him and hints at his suspicions. Matt has slowly developed feelings for the scientist, but when Caitlyn returns home to express her concerns to John, she soon realises that all is not as it seems: Matt has killed him and taken his place!
Horrified and clearly not in love with the former A-lister, Caitlyn's attempt to deactivate the nanobots, combined with the electric shock, seems to complete Matt's transformation into a monster (the blast sends them into overdrive, causing his body to completely deteriorate). Realising he's become a monster, Matt begs her to put him out of his misery, and she does so, causing his muddy remains to wash away down a nearby sewer grate.
Later, we see that Caitlyn has told the police what happened, and Matt is believed to be missing. However, she runs into a beggar who takes her newspaper before bowing exactly as Matt once did. Matt then returns to the sewers beneath Gotham and is confronted by Corr, who expresses her love for him. When the camera pans out, though, we see that he's created her and is talking to himself.
He then deteriorates and transforms into a semi-comic-accurate Clayface, though only half of his face looks like the classic comic book villain, highlighting the tragedy of Matt's new status quo as he lets out an anguished roar.
So, is he a hero or villain? Up until Clayface kills John, he is very much an anti-hero on a (mostly) justified mission of revenge. Still, killing a cop just so he can steal his girl takes things to another level, and it's clear the nanobots have started affecting his mind. Caitlyn's attempt to deactivate them—and that electric shock—seems to be what completes Matt's transformation into a monster. As his crimes have come to light, he can't go back to his old life. In fact, it looks like he may only be able to hold his new forms for a certain amount of time before reverting to "clay."
It's a fairly tragic ending, but not one that necessarily sets up a clash with Batman or Clayface's role in Creature Commandos. Presumably, after taking refuge in the sewers, Matt eventually decides to return to the surface and find work as a very different kind of actor, taking the place of those he's hired to impersonate, even if it means killing them.
Clayface is now playing in theaters.