The year is Universal Century 0105, twelve years after the devastating Char's Rebellion. The Earth Federation, having grown complacent and tyrannical, imposes brutal policies on space colonists and Earth's own citizens. In response, a clandestine resistance movement known as Mafty has risen, carrying out targeted assassinations of corrupt Federation officials to disrupt an upcoming Federation conference in Adelaide, Australia. The movement's enigmatic leader, known by the codename Mafty Navue Erin, is in truth Hathaway Noa, the son of legendary Federation captain Bright Noa, who carries the heavy burden of his actions during the final conflict of the previous era.

Hathaway is haunted by past trauma from the Second Neo Zeon War, specifically the death of the troubled young Newtype Quess Paraya and his own subsequent act of killing Chan Agi, a lover of his hero Amuro Ray. As he prepares for a decisive air raid on the Adelaide Conference, he finds himself increasingly drawn to a mysterious and beautiful young woman named Gigi Andalucia. Gigi possesses an uncanny, almost preternatural intuition that allows her to see through facades and predict outcomes, and her cryptic words stir up Hathaway's suppressed memories and inner conflicts.

Opposing Mafty is Commander Kenneth Sleg of the Earth Federation Forces, a cunning and pragmatic officer tasked with eliminating the resistance and securing the Adelaide Conference. Kenneth is a capable adult who navigates the political and military landscape with cynical ease, keeping a mistress named Mace Flower while also becoming entangled with the enigmatic Gigi. The film follows the tense convergence of these three characters, each pursuing their own goals while becoming emotionally entangled in a complex and messy triangle. As Hathaway steels himself for his mission aboard the mother ship Valiant, he must contend not only with Federation defenses but also with his own psychological deterioration.

The narrative arc culminates in the aerial battle over Adelaide, where Hathaway pilots the sleek and powerful RX-105 Xi Gundam. The Federation deploys its own advanced mobile suits, including a surprise appearance of a mass-produced version of the legendary Nu Gundam, which triggers a severe psychological breakdown in Hathaway as he hallucinates the ghost of Amuro Ray. This confrontation explicitly confirms the film as a sequel to the theatrical version of Mobile Suit Gundam: Char's Counterattack, directly addressing the specific nature of Hathaway's guilt. The film explores themes of intergenerational trauma, the cyclical nature of political violence, and the painful gap between revolutionary ideals and human fallibility, all set against the backdrop of intense, large-scale mobile suit combat.