"Xam'd: Lost Memories" is set in a world divided by conflict, where the Northern Government and the Southern Continent Free Zone are engaged in a prolonged war. The story unfolds on Sentan Island, a neutral territory caught between the two powers. Akiyuki Takehara, a high school student living on the island, leads an ordinary life until a mysterious girl named Nakiami arrives carrying a strange artifact. During a sudden terrorist attack by the Southern forces, Akiyuki is infected by a creature known as a Hiruko, a biological weapon that transforms its host into a monstrous being. However, instead of succumbing to the transformation, Akiyuki gains the ability to control his new form, becoming a Xam'd, a powerful entity with unique abilities.

Nakiami, who belongs to a nomadic group called the Postal Service, takes Akiyuki aboard their airship, the Zanbani, to help him understand and control his newfound powers. The Postal Service travels across the war-torn world, delivering messages and goods while avoiding the conflict. As Akiyuki learns more about the Hiruko and the Xam'd, he discovers that the war is deeply intertwined with the origins of these creatures. The Hiruko are remnants of an ancient civilization, and their existence is tied to the mysterious substance known as "Humanform," which powers much of the world's technology.

Throughout the series, Akiyuki struggles with his dual nature as both human and Xam'd, grappling with the moral implications of his power and the toll it takes on his body. His journey is paralleled by the experiences of his childhood friends, Furuichi and Haru, who remain on Sentan Island. Furuichi becomes involved with the Northern Government's military, while Haru is drawn into the conflict through her connection to Akiyuki and her own family's secrets. The narrative explores themes of identity, loss, and the consequences of war, as the characters' paths intersect and diverge.

The story delves into the broader political and social dynamics of the world, revealing the motivations behind the war and the true nature of the Hiruko. The Northern Government seeks to harness the power of the Hiruko for military dominance, while the Southern forces resist their influence. The Postal Service, with its neutral stance, becomes a key player in uncovering the truth about the Hiruko and the ancient civilization that created them. As Akiyuki and Nakiami uncover the secrets of the Xam'd, they are forced to confront the choices that will shape the future of their world.

The series balances personal drama with larger-scale conflicts, weaving together the fates of its characters with the overarching narrative of war and discovery. Akiyuki's journey from an ordinary teenager to a reluctant hero is central to the story, but the series also provides depth to its supporting cast, including Nakiami, Furuichi, Haru, and the members of the Postal Service. The interplay between individual struggles and the broader societal issues creates a layered narrative that explores the complexities of a world in turmoil.