Lawrence III, a Pokémon collector, strives to make a legendary prophecy occur. His plan to capture the legendary birds Moltres, Zapdos and Articuno will ultimately lead to the capture of the "Beast of the Sea" Lugia. Lawrence sets out in his flying hovercraft to the heart of the Orange Islands to capture the three legendary birds, referred to as the Titans of Fire, Ice and Lightning. He successfully captures Moltres, but the balance of power the birds have over the world's climate begins to collapse, causing all sorts of weather phenomena across the world, alerting countless Pokémon to the change. Ash Ketchum and his companions Misty and Tracey Sketchit get caught in a freak storm, and are washed ashore Shamouti, set in the centre of the Orange Islands. Learning the island festival celebrating the legend is about to begin, Ash is selected as the festival's chosen one by a girl named Melody, the festival maiden.
At the festival's banquet, Melody explains to Ash he must retrieve three glass balls from each of the legendary birds' islands and take them to Shamouti's shrine, guarded by a talking Slowking, where Melody will end his task by playing the festival's song, actually the song of Lugia. Ash immediately sets out, led by the troubled Pikachu. Taken to Fire Island by sea captain Maren, Ash and Pikachu find Moltres' treasure, but are interrupted by Team Rocket. Misty, Tracey and Melody arrive via Melody's multi-purpose boat, followed by Zapdos who attempts to conquer the island. Lawrence appears overhead, absorbing Zapdos' electrical energy and captures it along with Ash and co. accidentally. Meanwhile, Professor Oak, Professor Ivy, and Ash's mother Delia Ketchum fly to the islands but their helicopter crashes on Shamouti. Lawrence frees Ash and the others and attempts to capture Articuno, accidentally awakening Lugia in the process. Meanwhile, Ash and the others manage to free Moltres and Zapdos who escape and bring down Lawrence's hovercraft.
Afterwards, Articuno, Zapdos, and Moltres have engaged in all out war, unleashing all of their powers in a bid to destroy each other. Ash and co. manage to escape, gaining Zapdos' treasure in the process, and are transported back to Shamouti by a mysterious water spout revealed to be Lugia. Lugia at first tries to stop the battle himself, but is outmatched by the birds powers combined against him. Telepathically he then explains the birds and the weather can be stopped by the legend's Chosen One, actually Ash in reality. Ash agrees to go to Articuno's island to get the final treasure, but his progress is halted by the legendary birds. Team Rocket arrive on a speedboat made from a dingy and the helicopter's discarded propeller, wishing to save the world in order to continue their villainy. The group race up to Articuno's shrine and retrieve the treasure, but before they can escape, the legendary birds appear. Zapdos destroys the speedboat and Ash watches on as Articuno is knocked out by Moltres and Zapdos. Lugia rescues Ash and Pikachu, but Team Rocket heroically fall into the sea upon realising they are slowing Lugia down. Lawrence tries to catch Lugia, but Lugia uses its Aeroblast attack to destroy his airship and take out Moltres and Zapdos before collapsing into the sea.
Misty and Tracey rescue Ash and Pikachu, who venture to Shamouti Island's shrine and place the final treasure with the others. Melody plays Lugia's song, ending the storms and bringing peace to the legendary birds. Lugia rises from the sea, bringing the true Beast of the Sea with him, an underwater current that has been altering the climate. Later, after the birds returned to their islands, Lugia departs after thanking Ash. Delia and the professors arrive. Delia, having witnessed her son's actions, asks him to be more careful which he complies with. Lawrence laments on his decisions, deciding to start his collection again. Team Rocket reach the island a day later and are told by Slowking that the audience saw their heroics; the trio contemplates changing their ways but ultimately decide to stay the same when they realize their boss might not like the idea.
- The storyline continues in Little Bear's Adventures of Pokémon 3: The Movie.