The film opens with Jack “Jackie” Walker, a Pokémon ranger undercover, infiltrating Phantom the Pirate’s ship and retrieving a special Pokémon egg to prevent Phantom’s selfish desires. Jackie manages to escape with the help of a Mantine, a water/flying type Pokémon. Sometime later Ash Ketchum along with his Pikachu, Brock, May, and her younger brother Max stumble upon the Marina Group, a traveling family circus consisted of water and psychic-type Pokémon. They meet Elizabeth, the star and daughter of Kyle and Meredith, performers and Kyle’s father Chip, the conductor. They kindly take in Ash and the others who are suffering from dehydration in the wasteland. After a performance at a nearby town, May discovers the same egg shown earlier in the film by the Marina Group’s pet Buizel, a water-type Pokémon. A clown apparently traveling with the group takes away the egg and hands it to Elizabeth. That night, May has a dream with her encountering a temple under the sea and a mysterious Pokémon. That morning she explains it to everyone and it turns out that Marina Group have all had that dream and tell the others about a group of people called the People of the Water, stating that they are in relation with them. Meanwhile, Team Rocket; Jessie, James and Meowth raid the Marina Group’s trailer for the egg and attempt to hand it over to Phantom. They fail when the Marina Group’s clown reveals himself as Jack Walker who captures a Fearow to retrieve it.

Jackie explains that the egg belongs to a legendary water-type Pokémon called Manaphy and that his mission is to deliver it to Samiya, the sea temple. Shortly, Phantom and his goons arrive to steal the egg. After a brief struggle, the egg hatches in May’s arms revealing Manaphy. After escaping Phantom, the group arrive at a series of ruins where Kyle uses a bracelet referred as the People of the Water’s mark to open a secret water route leading to a chamber that displays a legend about Samiya. Ash and the others learn that Samiya can blend in with the water and only appears during a rare lunar eclipse. Jackie mentions that they must protect Manaphy from Phantom or else Phantom will find and steal Samiya’s treasure, the sea crown. Leaving through a grotto, Jackie informs Ash and the others that they can’t participate in his mission. On the mean time, Phantom encounters Team Rocket who hires them as a reward for leading him to Manaphy. Phantom decides to follow the group toward the temple. Jackie, Manaphy and the Marina Group depart on Chip’s boat, the Blue Lagoon to Samiya however Manaphy throws a tantrum noticing May isn’t with it. It uses it ability, Heart Swap to link Jackie to Ash, switching bodies. Ash and the others are welcome aboard on the mission, however Jackie feel concerned over May and Manaphy’s developing relationship. Manaphy, choosing its path individually, leads the Blue Lagoon to Samiya’s location. During their journey, Jackie reveals to Ash that he wanted to become Pokémon ranger after a group of migrating Pokémon saved his life in the mountains as a child. Jackie shortly believes that May’s motherly affection toward Manaphy was effecting his mission and so on May starts to avoid overlay contacting with Manaphy, much to her dismay. That night, Elizabeth hands May her bracelet insisting that she should wear it.

Ash Ketchum, Dawn, Brock and their Pokémon arrive in Michina Town. As the group relaxes in a nearby river, some watermelons suddenly float towards them. While enjoying the watermelons with their Pokémon, a boy named Kato and his sister Kiko appear who justify that the watermelons were theirs and were kept to cool in the flow of the river. Kato and Kiko then challenge Ash for a tag battle in return of the watermelons. Ash and Dawn thus plan for a tag Pokémon battle against them using Ash's Pikachu and Dawn's Piplup against Kako's Heracross and Kiko's Beautifly. Ash and Dawn win the battle with good teamwork and also request Kato and Kiko to join for eating watermelons. After that, Kato and Kiko suggest Ash and the gang visit the local temple ruins. Whilst visiting a lake, a typhoon suddenly strikes up, but siblings named Sheena and Kevin summon Dialga who ends the typhoon. Giratina arrives, but Sheena uses her ability to communicate with a Pokémon's heart to quell their conflicts with each other, sending Giratina back to its dimension. Palkia then arrives to save Dialga from another typhoon, and Sheena once again uses her ability to sync with the two, to thank them. Taking the kids to the temple, Sheena and Kevin explain they investigate disruptions in time and space, and worry that Arceus, the creator of the dimensions, is to awaken and is responsible for the encounters between Dialga, Palkia and Giratina.