The plot of American Nightmare is framed by the narration of an episode of the fictional TV show, "Night Springs," which follows the style of The Twilight Zone and appeared on television screens throughout the original Alan Wake.
Alan Wake's friend and manager, Barry, is asleep in a motel room. The narration explains that Alan is attempting to chase down the "herald of darkness", Mr. Scratch, who is Alan's evil doppelganger created by a dark force. Scratch is determined to take away everything Alan loves, including his wife, Alice. Alan, as the "champion of light," has the ability to rewrite reality, and was able to write his escape from Cauldron Lake in Washington. He ends up near the small town of Night Springs, Arizona, and learns that he has been missing from the real world for nearly two years.
A nearby oil derrick erupts with several foes controlled by Mr. Scratch. Seeking light, Alan runs to a nearby motel, where he encounters Emma Sloan, who at first thinks he is Mr...