The film begins at the Shamouti Shrine, where a Slowking kept guard, as the prophecy was read. Later, it changes to an aircraft where a computer shows holograms of the three legendary birds.Lawrence III, a wealthy collector of the world's most valuable antiques, wishes to make his collection complete by catching the three legendary birds, Moltres, Zapdos and Articuno. Any one of them would be a priceless addition to Lawrence's collection, but he aims to capture the three in order to capture the fourth and most powerful bird, Lugia. Using his giant flying aircraft, Lawrence arrives at Fire Island, home to Moltres. He provokes the Flame Pokémon by shooting ice cannons at its habitat. This caused it to leave its island, and after weakening it with more ice shots, he captures the firebird. However, as Lawrence begins to follow the prophecy, the world's climate begins to be affected.
Somewhere in the Orange IslandsAshMisty and Tracey are traveling to their next island destination on board a boat owned by a woman named Maren. They send out their Pokémon as Tracey suggested so they can have some fresh air. Charizard and Snorlax, however, were briefly out of their Poké Balls, but Charizard was recalled after it breathed fire, and Snorlax was recalled because it weighed down the boat. Team Rocket as usual follow in their submarine. Suddenly, both parties are struck by a sea storm and dragged across the ocean to the middle of the Orange Islands, where they arrive at Shamouti Island. The weather is also going wrong at Pallet Town, as witnessed by Professor OakDelia Ketchum, and Mimey. They witness various Pokémon traveling in groups towards one direction. According to the Professor, Pokémon can sense the abnormalities in nature better than humans. Ash, Misty, and Tracey, along with their Pokémon meet the islanders of Shamouti, who are celebrating their annual Legend Festival following the prophecy's tale - a Chosen One shall help Lugia to save the world and calm the legendary birds. Maren's friend, Carol was once the Festival Maiden, but as she's too old for that role, her younger rebellious sister Melody takes on the role with some reluctance. As Ash is introduced as a Pokémon Trainer, the islanders become ecstatic, as the legend foretold his arrival. As Melody meets Ash, she approves of him for the role of Chosen One and kisses him, angering Misty.
During the festival ceremony, Melody plays a tune similar to the cry of Lugia and afterward explains Ash's role as Chosen One. He must venture out to the islands of the legendary birds and collects three glass orbs (she uses some fruits as the orbs during her explanation) that represent the elements of Fire, Ice and Lightning, bring them back to Shamouti's shrine where Melody will play the same tune which will end the festival. Ash heads out immediately, with Maren and Pikachu going with him. Pikachu steals Ash's hat as Misty shows reluctance in going. Team Rocket rows what's left of their submarine, which became a boat. Maren's boat crosses their path and capsizes the trio's boat. As they hang on, a wave crashes onto them. After a brief scene of Slowking noticing the mess caused by Moltres' capture, Melody expresses her concern for Ash as the storm extinguishes a torch. As Team Rocket finally make it ashore, they notice Melody, Misty, and Tracey running.
As Lawrence's aircraft detects the presence of Zapdos, islanders watch the news which talked about the unusual weather. This news story also reaches Delia and Professor Oak. Professor Ivy phones in in the middle, telling Professor Oak that the Pokémon are behaving strangely. Meanwhile, Pikachu (who was the only one aware of the urgency of the situation) leads Ash to the location of the Fire Sphere on Fire Island, after Maren's boat crashes onto its shores and loses its rudder. The boat carrying Team Rocket, Misty, Tracey and Melody flipped, causing Team Rocket to get launched onto the island, and the boat crashes onto a rock as Maren tries to relax. When the storm threatens to harm the boat containing the others, Melody hoists a sail. They use the boat and the wind to ascend the steps. The scene changes to Lawrence's aircraft as he admires his newly acquired Moltres, who is helpless. The computer announces Zapdos' arrival to Fire Island.
The scene changes again as Ash and Pikachu ascend the stairs, and Team Rocket plans to take Pikachu. Pikachu finds a pedestal containing the Fire Orb and motions Ash. Ash tries to obtain the sphere while Pikachu urges him on, and manages to collect it. As they turn to head back, they confront Team Rocket and as the trio recites part of their motto, both groups break the fourth wall. Melody, Misty, and Tracey's boat arrives, as does Zapdos. Pikachu and Zapdos communicate using electrical attacks, with Meowth translating the conversation, as Zapdos explains it shall claim the island for its own. Lawrence's ship appears, draining Zapdos of its power and later capturing the Electric Pokémon and the rest in Melody's boat. The ship's computer informs Lawrence that there were others captured along with Zapdos. As they stand in the cage in the ship's lower chamber, Tracey notes the imprisoned birds, and Melody notes a stone with the Shamouti Prophecy etched and reads aloud the first sentence. As Lawrence mentions his plan to collect the birds, Misty criticizes him. Lawrence is very polite to his accidental captives and kindly releases them. The computer informs him of Articuno's location, and he leaves. The scene changes to Articuno as it uses Ice Beam on an island, freezing it and the water around the island. The news later states that a massive amount of Pokémon are making their way to the island, except for those that cannot cross water. The newspeople speak to the two Professors about a cause, and Professor Oak correctly predicts that the legendary birds are involved. After a brief scene featuring Slowking, followed by another scene depicting Shamouti Island in a snowstorm as Carol worries about Melody, the scene return to the lower chamber as Melody reads the prophecy again.
The group suggest to free the imprisoned birds as Lawrence's ship nears Articuno. Lawrence provokes the Freeze Pokémon using fire. Something underwater notices the commotion and ascends. Back in the chamber, Ash calls out Charizard and Pikachu to use Flamethrower and Thunder Shock to free Moltres, while James calls out Weezing, who fails to save Zapdos. Jessie then releases Arbok to attempt to release Zapdos with Poison Sting, but it fails to penetrate the prison. Ash calls out Squirtle and Bulbasaur. As Squirtle joins in with Water Gun, Moltres is released. Moltres unleashes a Flamethrower attack that breaks Zapdos free. As the two birds are freed, however, they immediately get into a fight and destroy the ship in the process. The ship informs Lawrence that it is going down, and promptly crashes onto Lightning Island. The group evacuates and lands onto the island. The debris of the ship crashes onto the pedestal, destroying it and releasing the Lightning Sphere, which Ash acquires. The group escape onto Melody's boat while Moltres, Zapdos and Articuno duel overhead. A giant typhoon scoops up the boat and carries it to the Shamouti Shrine, where Ash and the others meet Slowking, the shrine's guardian. Able to speak, he shows Ash where to place the collected spheres. When he sets down the Spheres of Thunder and Fire, the legendary birds attack the shrine, but are stopped by the sudden appearance of Lugia. Lawrence eyes Lugia from the remains of his aircraft in awe, considering it "his prize" while the other three birds gang up and attack it. Lugia attempts to quell the fighting and protect the shrine, but the Diving Pokémon eventually falls victim to the attacks and crashes down. Meanwhile, the massive gathering of Pokémon arrive after crossing the now-frozen sea.
Melody plays the same tune from the ceremony, which reinvigorates the fallen Lugia. Lugia, who can also speak using psychic powers, explains that Ash must collect the Ice Sphere from Articuno's island. Ash doubts he can do it, but support from his friends and Pokémon changes his mind when Misty realizes when the legend states 'The earth shall turn to ash' it refers to the earth relying on Ash as the Chosen One to save it. As Ash sets out with Pikachu, Squirtle, Bulbasaur, Charizard, and Lugia towards Ice Island, Team Rocket witness a helicopter containing Professor Oak, Delia, Professor Ivy and a news crew crash land. Seeing a discarded inflatable raft and the helicopter's tail propeller, they get an idea. Ash's attempts to reach the island are thwarted by the legendary birds, but Team Rocket surprisingly come to the rescue on a motorboat using the items they salvaged. Team Rocket shock Ash by revealing that they do not wish for the world to be destroyed. The heroes (and villains) race through the island using the raft and find the Ice Sphere, which Ash obtains. The legendary birds appear and ambush the group in Ice Island, then Articuno is knocked down by its opponents. Lugia saves Ash, Pikachu and Team Rocket and heads back to Shamouti.
However, Lugia is slowed down by the extra weight of Team Rocket. The trio of villains decide to let go and nobly sacrifice themselves to allow Ash to save the world, which surprised him. As Ash notices the gathered Pokémon, he asks Lugia, who responds that they gathered in case they were needed, yet they stood still because they were unsure about what to do. Lawrence's ship, which is still functional, tries to capture Lugia, but it uses an Aeroblast attack to defeat the remaining legendary birds and Lawrence's ship before falling unconscious into the sea. Ash also falls unconscious and Pikachu tries to urge Ash to wake up. Fortunately, Misty arrives in time to save the two. Misty and Tracey revive Ash, who leads the group back to the shrine. Ash inserts the final sphere into the shrine, which shines brightly with the unison of the spheres. The pillars glow in tune as Melody plays Lugia's song, which revives it and restores balance to the legendary birds. Lugia takes Ash and Pikachu for a flight with Articuno, Zapdos and Moltres beside them. Suddenly, a giant stream of water rises out of the ocean (the Beast of the Sea) and is tamed by the song. All the birds return to their homes and the Beast of the Sea vanishes into the ocean.
Lugia also departs, thanking Ash for his help. After Lugia leaves, Delia, Oak and Ivy arrive. Delia scolds Ash for his recklessness, but after Misty tells her he saved the world, Delia asks him if he could visit her once in a while on his journey. Ash agrees to her request. Lawrence picks up an Ancient Mew card from the wreckage of his ship, deciding to restart his collection on a smaller scale. The film ends with Team Rocket appearing on Shamouti, having survived their sacrificial fall, lamenting that nobody actually saw them being heroes - but Slowking reveals to them that many people watched them and are right now. Slowking looks towards the screen, breaking the fourth wall, as do Team Rocket, who end the film discussing what they should do now since they seem to now be good.