Professor Cerise announces to his research assistants, Ash and Goh, that psychic energy was recently detected on the isolated Cero Island. The Professor hints that it might be Mew, which particularly excites Goh, who has wanted to catch Mew ever since encountering it at a summer camp. Professor Cerise hands the boys their boat tickets, and they soon make landfall.
Scaling the steep cliffs around Cero Island, the boys rush up to a steep ledge to admire the expansive wilderness. Goh then pulls out his special sensor device, however a scan of the area yields no search results for the mysterious source of the psychic energy. Ash suggests they just head off in whatever direction. Ash makes the first move by leaping down the cliffs into the jungle below, while Goh tries to keep up with Ash's enthusiasm. They stop at a large tree full of Pokémon, where Goh catches an aggressive Mankey. The other Mankey then go on the attack, chasing the boys through the jungle and into a bog. Goh manages to rush to hard ground and calls out his Heracross to save Ash and Pikachu form sinking further. Goh, with the help of his Caterpie's String Shot, then makes a zip line to cross the boggy river. While swinging their way over to the other side, Goh is attacked by a Kingler and Krabby. Ash helps pull Goh away from Kingler's claws, while Goh catches the Krabby with ease. Next obstacle, Ash and Goh arrive at a fast-moving river. Ash leads the way across some stepping stones, but his river crossing is interrupted by a passing Gyarados. Goh tries to throw a Poké Ball at the Atrocious Pokémon, but it quickly breaks free. Ash orders Pikachu to attack with an Electroweb, which subdues the Gyarados enough for Goh to reach Ash's side. The Gyarados manages to break free and attacks the boys with a torrent of water, propelling them into the river. Goh calls on his Dewgong's assistance, but its efforts fail to stop everyone from going over a waterfall.
When Ash, Goh and Pikachu wake up, they find themselves on dry land and amongst the jungle roots. A group of wild Pokémon suddenly appear, happily playing together until they spot the humans looking at them. Pikachu and Ash try to reassure the frightened group that they are friendly, however the Pokémon rush off into hiding. Their guardian, Mewtwo, soon makes an appearance. Using telepathy, it bluntly asks Ash and Goh why they are visiting the island. Ash instantly recognizes Mewtwo and thanks it for saving him. Goh meanwhile is perplexed by Mewtwo, and notes its similarities to Mew. He then pulls out his scanning device, which confirms the presence of strong psychic energy around Mewtwo. Mewtwo questions Goh’s desire for wanting to catch Mew, and Goh explains that he wants to understand every Pokémon, and eventually Mew who is said to hold the genetics of all Pokémon. Goh then realizes that Mewtwo is also a Pokémon and proclaims that he will catch it as well. Mewtwo is taken aback, and warns Goh that it was created to be the world's strongest Pokémon. Ash then admits that he would like to battle Mewtwo, adding that it would be another step towards becoming a Pokémon Master.
Mewtwo considers its next course of action before accepting Ash and Goh's challenges, before confidently ordering them to put their dreams on the line. With a glint in their eyes, Ash and Goh call out Pikachu and Cinderace, respectively. Pikachu leaps forward with an Iron Tail while Cinderace tries a Blaze Kick, but Mewtwo easily holds off both attacks and tosses both Pokémon back at their Trainers. The boys remain defiant, with Ash ordering Pikachu to attack with Quick Attack. Mewtwo blocks Pikachu's advance, which allows Cinderace to land a Blaze Kick on it. Pikachu then uses Thunderbolt, only for Mewtwo to hold his attempts off with a counter Shadow Ball. Pikachu is thrown against a stone ledge. Ash manages to break his fall, and switches Pikachu out for Lucario. Mewtwo quickly knocks Cinderace and Lucario back with a pair of Shadow Balls, however the Pokémon are determined to fight on. Ash orders Lucario use Double Team followed by Force Palm while Cinderace rushes forward with Quick Attack, however Mewtwo holds them both off. Cinderace launches another Blaze Kick and Lucario tries a Reversal attack. Mewtwo remains unfazed and grabs both Pokémon before tossing them away. However, Lucario and Cinderace insist on battling on. An explosive Pyro Ball and Aura Sphere combination is held off by Mewtwo's Barrier defence, and it emerges unscathed. Mewtwo makes the final stand, launching a ginormous Shadow Ball to defeat its opponents.
Mewtwo stands over the boys, as they lay on the ground from the Shadow Ball. It again questions Ash and Goh's dreams, but the boys insist they will continue and have friends on their side to help. Mewtwo remarks that Ash and Goh have formed incredible friendships with their Pokémon. It, however, notes not all humans are the same. Ash and Goh quickly realize the wild Pokémon were all rescued by Mewtwo after being hurt by people. Mewtwo remarks that Cero Island is not a place for humans, though thanks the boys for making the day so enjoyable. Mewtwo uses its Psychic powers to help itself and its Pokémon friends escape into hiding, hoping not to be disturbed by humans again. Mewtwo leaves them with some parting words, noting that while immature, the boys' potential is limitless and their journey is just beginning. In a flash of light, Mewtwo and the other Pokémon are gone.
Ash and Goh later wake up to find themselves outside the Cerise Laboratory at night. Ash wonders if Mewtwo brought them there. As the boys consider Mewtwo's wise words, they promise to continue working towards their dreams.