It has been ten years since the end of the war with the Kaiju. Jake Pentecost - the son of war hero Stacker Pentocost - has spent the last several years living as an outlaw who deals in stolen Jaegar technology in California. One fateful evening, his quarry is taken by a plucky young girl named Amara Namani, who was using stolen tech to build a Jaegar of her own; "Scrapper", a Jaegar constructed from junk that was small enough to be controlled by a single pilot without any mental strain. Amara and Jake end up being chased and detained by the Pan-Pacific Defense Corps, where Jake is offered a deal by his older adopted sister, Secretary General Mako Mori: serve out a sentence in prison, or return to service and help train a new generation of Jaegar pilots.
Jake reluctantly agrees to return to the Corps, bringing Amara with him to train as a new pilot. He is reunited with Nate Lambert, his former co-pilot for the Jaegar "Gipsy Avenger", with whom he had departed on less-than-friendly terms. Not all is well at the Shatterdomes, however; Shao Corporation, a China-based company, is poised to replace human pilots with an army of remote-controlled drone Jaegars. A demonstration is set to commence in Sydney, Australia, before a vote is placed on whether to implement them. Mako, who has her doubts about whether the drones could replace pilots, asks Jake to accompany her to Australia in Gipsy Avenger, to ensure everything goes well.
As the demonstration is set to commence, however, a rogue Jaegar, "Obsidian Fury", suddenly attacks. In the fighting between Obsidian Fury and Gipsy Avenger, Mako is killed before the rogue Jaegar is forced into retreat. As her untimely demise prompts the drones to be pressed into service immediately, a data transmission Mako sent leads Jake and Nate to Siberia, to an abandoned Jaegar production plant. While investigating, Obsidian Fury appears again. This time, however, Gipsy Avenger puts the rogue Jaegar out of commission. When Obsidian Fury's head is ripped open to extract the pilots, however, Jake and Nate make a frightening discovery; the pilots were not human, but actually a secondary Kaiju brain!
To make matters worse, when the remote Jaegar drones are activated, the secondary Kaiju brains that formed the core of the AI modules take control, transforming the drones into Jaegar-Kaiju hybrids that go on a rampage. Newton Geiszler, one of the scientists who helped win the Kaiju war who worked for Shao, makes matters worse by activating a subroutine that prompts the drones to force open breaches along the Pacific rim, threatening the world with a massive Kaiju invasion. As it turns out, Geiszler had fallen under the thrall of the creators of the Kaiju, the Precursors, when he and his colleague Hermann Gottlieb linked their minds with a piece of Kaiju brain, and was being forced to do their bidding.
Gottlieb manages to access a subroutine with the help of Shao's CEO, Liwen Shao, and force a feedback loop that causes the drones to self-destruct, closing the breaches and preventing a full-fledged Kaiju invasion. Unfortunately, three Kaiju managed to get through, and were converging on Tokyo. The reason for travelling to one destination at once soon becomes clear; the Kaiju were not attacking cities at random, but demolishing them en route to Mount Fuji, an active volcano rich in rare earth elements. As Gottlieb discovered while developing new rocket thrusters for Jaegars, Kaiju blood reacts violently when in contact with rare earth elements. If the Kaiju managed to enter Mount Fuji, the reaction between their blood and the volcano's elements would engulf the world in toxic fumes, wiping out all life on the planet and terraforming it for the Precursors.
The situation is dire, with most of the world's Jaegars wrecked and most pilots killed. Jake and Nate gather a team of cadets, including Amara, while Shao oversees ad hoc repairs on the four remaining operational Jaegars, before using Gottlieb's thrusters to intercept the three Kaiju. Just as the Jaegars gain the advantage over the Kaiju, the Precursor-possessed Geiszler summons a swarm of robot drones he developed in secret to merge the three Kaiju into one "Mega-Kaiju", which easily overpowers the Jaegars, putting three of them out of commission and gravely injuring Nate, leaving Jake as the lone pilot of Gipsy Avenger until Amara takes his place.
With the Mega-Kaiju gaining ground on the summit of Mount Fuji, there is only one plan left to stop it: using a thruster to launch Gipsy Avenger into low orbit, then sending it crashing onto the Mega-Kaiju. Shao, remotely piloting Scrapper, welds a thruster to Gypsy Avenger's hand, sending the Jaegar flying. Jake and Amara eject from Gipsy Avenger in the moments before it crashes into the Mega-Kaiju, splitting it in twain and killing it.
With disaster averted, Gieszler is apprehended. Jake warns the Precursors that next time, they won't be the invaders; the humans will be the ones invading!
