The protagonist and player character of Silent Hill 4 is Henry Townshend, a resident of the South Ashfield Heights Apartments building in the fictitious town of Ashfield. Henry is an "average" man who has been described by Konami as an introvert in his late 20s. For the most part Henry navigates the game's world alone, although he eventually works with his neighbor Eileen Galvin. Henry also deals with the new supporting characters of Cynthia Velázquez, Andrew DeSalvo, Richard Braintree and Jasper Gein.
Silent Hill 4: The Room incorporates two unseen, minor characters from previous installments: investigative journalist Joseph Schreiber and deceased serial killer Walter Sullivan. Joseph was first referenced in Silent Hill 3 with a magazine article he has written condemning the "Hope House" orphanage run by Silent Hill's religious cult, which the game's protagonist, Heather, can discover. In Silent Hill 2, Walter is referenced in a newspaper article detailing his suicide in his jail cell after his murder of two children. Sullivan appears in two forms: an undead adult enemy and a neutral child supporting character. Walter's previous victims play a small role in the game as enemies.
At the beginning of the game, Henry Townshend has been locked in his apartment in South Ashfield for five days with no means of communication and having recurring nightmares. Shortly afterwards, a hole appears in the wall of his bathroom, through which he enters alternate dimensions. His first destination is an abandoned subway station, where he meets Cynthia Velázquez, a woman convinced she is dreaming and who is soon killed by an unknown man. Awakening in his apartment, he hears confirmation on his radio that she is indeed dead in the real world. Similar events repeat with the next three people Henry finds: Jasper Gein; Andrew DeSalvo, a former employee of an orphanage run by Silent Hill's cult; and Richard Braintree, a resident in Henry's apartment complex. All the deaths bear similarities to the deceased serial killer Walter Sullivan's modus operandi.
Henry finds scraps of the diary of his apartment's former occupant, journalist Joseph Schreiber, who was investigating Walter's murder spree. Walter is an orphan who has been led to believe his biological mother was in Henry's apartment, where he had been found abandoned after birth. To "purify" the apartment, Walter, now in an undead state, is attempting to complete a ritual, which requires twenty-one murders to be committed. Midway through the game, a child manifestation of Walter interrupts the murder of the intended twentieth victim, Eileen Galvin, and she joins Henry trying to find Joseph. At the same time, supernatural occurrences begin to manifest in Henry's apartment. The two eventually find Joseph's ghost, who tells them that their only escape is to kill Walter and reveals that Henry is the intended twenty-first victim.
Shortly after Henry acquires Walter's umbilical cord, an item required to kill him, Eileen leaves Henry and returns to his apartment, either hoping to stop Walter from completing the ritual or under Walter's possession. He finds her with Walter, possessed and about to walk into a deathtrap, and a fight between the two men ensues. There are four possible endings, determined by whether or not Eileen survived the fight and on the condition of Henry's apartment. The "21 Sacraments" ending sees Walter and his child manifestation in his apartment, while the radio reveals that Henry and Eileen have died, along with the superintendent Frank Sunderland and several others. In "Eileen's Death," Henry awakens in his apartment, and learns from his radio that Eileen has died, to his sorrow. In "Mother," Henry escapes from his apartment building, and brings flowers to Eileen, who plans to return to the apartment building. His apartment, meanwhile, has become completely possessed. "Escape" begins similarly to the "Mother" ending, but Eileen resolves to find a new place to live, and his apartment is not shown to be possessed. There is no UFO "joke ending", a staple of the series.