Fear Toxin is a psychotropic hallucinogen used the signature weapon of Dr. Jonathan Crane/the Scarecrow, who uses it to induce involuntary and sometimes irrational fear into the victims' minds, driving them insane. Crane created it from the blue poppies found near the headquarters of the League of Shadows, whose leader Ra's al Ghul used it in his master plan to destroy Gotham City. Believing the plan was really to hold the city for ransom, the therapist made an alliance with the League to mass-produce the toxin at Arkham Asylum and have Falcone Crime Family sneak in its necessary ingredients.
When Dr. Jonathan Crane made an alliance with Ra's al Ghul and Carmine Falcone, he used the the blue poppies found in the League of Shadows' hideout to make his deadly fear toxin, and had Falcone sneak in necessary ingredients it. Crane tested the gas on his patients at Arkham Asylum and while doing so, created a special burlap gas mask to use during the experiments and for his "external tormentor" persona of "the Scarecrow". Keeping a large amount of the gas for himself, the therapist used it through special gas sprayers he kept on his wrists. Crane puts the final steps of the plan into action when the League of Shadows delivered him a special Wayne Enterprises microwave emitter capable of converting liquid into gas. Thus, he had a liquid form of the fear toxin poured into the Gotham City's water supply, and the League soon activated it on a moving train, gassing the parts of Gotham it passed and putting all citizens caught in it into a state of panic. Crane escaped from Arkham after his defeat in Batman's hands (where he was stripped of his mask and sprayed with his own toxin, which destroyed the rest of his sanity) and rode through the streets on a horse, terrorizing the Narrows. The Scarecrow, however, was forced to retreat after being shot in the face with a taser gun by Rachel Dawes. Batman managed to make a cure for the toxin and it was reproduced to cure the victims poisoned by gas. The toxin was later halted and flushed out of the water supply.