Obadiah Stane helped Howard Stark in establishing Stark Industries and tutored Howard's son Tony in corporate management when he came of age. Unsatisfied with standing in the shadow of someone he regarded as an impetuous youth, Stane made plans to take over Stark Industries himself and hired the terrorist group, The Ten Rings, to assassinate Stark when he came to Afghanistan to present a weapons demonstration. Not all went as planned; the terrorists kept Stark alive in order to build a weapon for them and the ever-inventive Stark was able to escape captivity.
When Tony returns to the US, Stane appears to help him in steering Stark Industries down a new path with the closing of the company's weapons development wing. However, he goes behind Stark's back and sells several weapons systems to both sides in the war taking place in Afghanistan. After the Ten Rings recover the remnants of Stark's Mark I armour in the desert, they contact Stane to make a new deal. Raza offers Stane the armour in exchange for a supply of new suits to arm his men with, but Stane betrays Raza and simply takes the prototype before having his men gun down the terrorists.
Stane quickly goes to work on building his own version of Stark's armour, calling it the Iron Monger. To power the suit, however, he requires a miniaturized arc reactor like the one that Stark uses to stay alive. Stane's scientists are unable to recreate the technology and so Obadiah resorts to visiting Tony in his home and using a device to paralyze him so that he can take the arc reactor out of his chest and use it to power his own suit.
DeathAfter powering up his Iron Monger suit, Obadiah uses it to try and kill Tony's assistant Pepper Potts. Tony, however, manages to come to the rescue after reconnecting the makeshift arc device he built in Afghanistan to his chest. Donning his armour, he battles against Stane on the freeway. Stark is at a significant disadvantage since his makeshift arc wasn't designed to handle the power consumption of the Mark III armour.
Stark and Stane's fight takes them on to the freeway, into the sky and back on to the roof of the Stark Industries factory. With his armour failing, Tony contacts Pepper and tells her to overload the arc reactor powering the factory, which will send a blast through the roof and fry everything up there. As Stane closes in to finish off Tony, Pepper overloads the reactor. Stark is thrown clear of the roof by the blast but Stane is struck directly and is electrocuted. He and the Iron Monger then fall through the skylight and on to the arc reactor which then explodes, vaporising Stane.