The prologue of the film acknowledges the events of the first Godzilla film (using the 1954 Godzilla monster rather than a successor Godzilla), while inventing its own timeline, explaining that the Oxygen Destroyer was never used here and that the capital of Japan was moved from Tokyo to Osaka. In 1966, Godzilla attacks the first Japanese nuclear plant in Tokai, Ibaraki Prefecture. After this, the G-Graspers, a section of Japan Self-Defense Forces, is dedicated to combat Godzilla. In 1996, clean plasma energy replaces nuclear energy, but this does not deter Godzilla from attacking the original plasma energy reactor. As a result, plasma energy is banned in the country.

In 2000, an experimental satellite-based weapon that fires miniature black holes, called the Dimension Tide, opens a wormhole through which a prehistoric dragonfly enters the present and deposits a single egg before exiting through the wormhole. A boy named Jun Hayasaka finds the egg and takes it with him when he moves to Tokyo. The egg starts oozing a strange liquid, so Jun throws the egg in the sewer. The egg, actually a mass of hundreds of eggs, splits up and starts growing when exposed to water, hatching into large dragonfly larvae called Meganulon that come out of the sewer to feed. They flood a portion of the city and molt on the sides of buildings, becoming adult Meganula.

Meanwhile, Godzilla appears in search of a source of nuclear energy, despite the edict shutting down all such attractants after its three previous appearances. While Godzilla is fighting the G-Graspers, who are assisted by rebellious scientist Hajime Kudo, the swarm of Meganula are attracted in turn to Godzilla’s energy, and attack it. During the course of the battle, the Dimension Tide is launched, but Godzilla survives the attack. Most of the Meganula are killed by both Godzilla and the Dimension Tide, but a few manage to drain off some of Godzilla’s energy and return to the sewer, with Godzilla seemingly following them. With the last of their strength, the Meganula inject Godzilla’s energy into a huge, sleeping larva that is in a giant, pulsating cocoon. It molts and appears from the water as Megaguirus, the queen of the Meganula.

After destroying part of Shibuya with shock waves generated by her beating wings, Megaguirus heads to the waterfront and faces Godzilla. As they engage in a lengthy battle, she uses her speed to avoid Godzilla’s attacks, but Godzilla eventually uses its own speed against her. As she flies toward Godzilla, it lunges forward with its dorsal fins in her path. She flies into the fins, and one of her arms is severed. Megaguirus, having been mutated by Godzilla’s energy, generates a blast similar to Godzilla’s atomic breath and knocks Godzilla down. Megaguirus speeds forward with the stinger on its long tail lowered, trying to stab Godzilla between the eyes. In a climactic moment, Godzilla catches the stinger in its mouth and crushes it in its jaws. Godzilla finally blasts Megaguirus with atomic breath, causing it to burst into flames and die.

It is revealed that Godzilla was attracted to a secret plasma energy project housed at the Science Institute, in violation of the ban. The G-Graspers continue their mission to destroy Godzilla, but with the Dimension Tide falling out of orbit they are unable to get a lock on it. The vengeful Major Kiriko Tsujimori pilots a ship towards Godzilla, ejecting only at the last second. The Dimension Tide is able to lock on to the craft and fires just before burning up on reentry; Godzilla blasts at the approaching black hole with its atomic heat ray, but vanishes. In a postlude, however, Tsujimori again enlists Kudo to investigate suspicious seismic activity; then in an after-credits scene at Jun’s school, an earthquake happens and Godzilla’s roar is heard again.