Martin Scorsese Shutter Island (2010) ends with a devastating twist that recontextualizes the entire film. Here is what really happened.
The Final Reveal
In the climactic scene, Dr. Cawley reveals the truth: Teddy Daniels (Leonardo DiCaprio) is actually Andrew Laeddis - a former U.S. Marshal who murdered his wife after she drowned their children in a lake.
The Treatment
To treat Laeddis severe delusions, the staff enacted an elaborate role-play: all personnel played their assigned roles, a fake prisoner "Laeddis" was prepared for escape, the hurricane was real but timed with the treatment, and Chuck was actually Dr. Sheehan.
The Lighthouse
The supposedly sinister lighthouse was always clean because there was no conspiracy. The real procedures happened in the hospital. The lighthouse was just where Dr. Cawley conducted his sessions away from prying eyes.
The Question
At the end, Andrew asks Dr. Cawley: "Which would be worse - to live as a monster, or to die as a good man?" He then undergoes electroconvulsive therapy and is seen calmly walking away - having "given in" to reality.
Evidence Throughout the Film
Teddy Daniels is an anagram/scrambled version of Laeddis. The pills are placebos to test his response. All the traumatic memories are real, just misattributed. Dolores was his wife, not Rachel Solando.
The Ambiguity
Some viewers believe Andrew was actually a U.S. Marshal investigating a conspiracy. However, the evidence overwhelmingly supports that he is a patient. The film final line - calling him "the monster he believes he was" - confirms this interpretation.