"Fushigina Daiko" centers on a young protagonist named Daiko, who discovers a mysterious drum hidden in an old shrine near her rural village. The drum, imbued with supernatural powers, begins to influence her life in unexpected ways. When Daiko plays the drum, it summons ethereal creatures known as "Yokai," spirits from Japanese folklore that range from mischievous to malevolent. These Yokai are drawn to the drum's rhythm, and their presence disrupts the tranquility of the village, forcing Daiko to confront the consequences of her newfound ability.

As the story progresses, Daiko learns that the drum is tied to an ancient legend involving a celestial battle between the gods and a powerful Yokai lord. The drum was created as a seal to contain the Yokai lord's essence, but its power has weakened over time. Daiko's connection to the drum marks her as the chosen guardian tasked with preventing the Yokai lord's resurgence. Alongside her childhood friend, Hiroshi, and a wandering monk named Renji, Daiko embarks on a journey to uncover the drum's origins and strengthen its power.

The narrative explores themes of responsibility, tradition, and the balance between the human and spirit worlds. Daiko's growth as a character is central to the story, as she grapples with the weight of her role and the sacrifices it demands. The series also delves into the relationships between humans and Yokai, highlighting moments of cooperation and conflict. The plot is driven by episodic encounters with various Yokai, each tied to a specific aspect of the drum's history or the village's past. These encounters build toward a climactic confrontation with the Yokai lord, whose return threatens both the human and spirit realms.

The main characters are defined by their roles in the overarching conflict. Daiko is determined yet uncertain, embodying the struggle of a young person thrust into a position of great responsibility. Hiroshi provides a grounded perspective, often questioning the risks of their journey but remaining loyal to Daiko. Renji serves as a mentor figure, offering wisdom and guidance while harboring secrets about his own connection to the drum. Together, they navigate a world where the boundaries between myth and reality blur, driven by the need to protect their home and restore balance.