An egg belonging to the Mythical Pokémon Manaphy is found floating in the sea by mercenary Phantom the Pirate, but it is subsequently stolen from him by Jack "Jackie" Walker, a Pokémon Ranger disguised as one of Phantom's crew members. Walker escapes Phantom's ship and joins the Marina Group, a traveling circus family that specializes in Water-type Pokémon, to deliver the Manaphy egg to Samiya, an undersea palace built by the People of the Water, whom the Marina Group are descendants of. Pokémon Trainer Ash Ketchum, his Pikachu, and their friends Brock, May, and Max become lost on their journey and encounter the Marina Group in their search for water, inadvertently becoming involved with Walker's mission.
When Phantom leads an assault after the Egg, Manaphy hatches in May's arms, who presumes she is its mother. The group eventually escapes Phantom by running into a network of ruins belonging to the People of the Water, where Ash and his friends learn about Samiya. Walker declines Ash and his friends' further involvement with his mission and departs in a boat with the Marina Group toward Samiya. However, Manaphy shows discomfort and starts crying without May's presence, forcing Ash and his friends along anyway. Manaphy's natural instincts lead the boat toward Samiya, and to Walker's dismay, May and Manaphy bond closer. Walker warns May of Manaphy's destiny to become Samiya's leader and that she will eventually need to part ways with it. May understands, but is distraught nonetheless. Lizabeth, the Marina Group's daughter, comforts May and gives her a bracelet known as the People of the Water's Mark as a memento of her time with Manaphy. One day, May loses her bandanna to the wind and Manaphy embarks far into the ocean to retrieve it. Ash and his friends, board a submarine operated by Lizabeth to search for Manaphy, eventually finding it along with Samiya during the expected lunar eclipse. Unbeknownst to them, Phantom had been in pursuit the whole time.
While exploring Samiya, the group encounters Phantom, who is able to open the chamber to the Sea Crown, the temple's central artifact consisting of numerous large crystals. Phantom begins to remove the crystals, causing Samiya to flood and sink deeper into the ocean. The group escapes to the submarine while Walker confronts Phantom, reconnecting most of the crystals to the crown before he, Phantom, and one of the crystals are washed away by the flood. Determined to save its home, Manaphy returns to the Crown's chamber with Ash, Pikachu and May in tow, while Lizabeth, Brock, and Max are forced to depart in the submarine. Ash and May reconnect the remaining crystals but notice one is missing. While escaping the flood, Ash finds the last crystal in a fountain. He puts Pikachu, May, and Manaphy in an air capsule that used to be part of Phantom's submarine before diving into the completely flooded crown chamber and reconnecting the crystal, causing Samiya to rise to the ocean's surface.
While May and Pikachu mourn Ash's apparent sacrifice, Phantom appears and kidnaps Manaphy. Ash, surrounded by a glowing aura from the newly rebuilt Sea Crown, pursues Phantom and retrieves Manaphy. Phantom returns with his ship, but Manaphy leads an assault with several wild Water-type Pokémon to destroy the ship and subdue Phantom in its rubble. With Phantom arrested, Walker is able to deliver Manaphy safely to Samiya, completing his mission. May and Manaphy share a heartfelt farewell before the group watches Samiya return to depths of the ocean. Ash and his friends separate from Walker and the Marina Group and continue on their journey.
- Duke, Smudger, Mako, Sharky, Willy, Mr. Great White, Hiccup, Toothless, Blythe Baxter, Zoe Trent, Pepper Clark, Penny Ling, Vinnie Terrio, Sunil Nevla, Minka Mark, and Russell Ferguson guest star in this film.
- Drago Bludvist will work for Phantom in this film.
- The storyline concludes in The Skarloey Engines' Adventures of Pokémon: The Rise of Darkrai.