A fifteen year old boy named Tsuyoshi wakes up surrounded by trash in a version of Tokyo's Shibuya district that is not quite real. He has no memories of his past, but a note he vomits up reads "escape Shibuya." This Shibuya is a virtual world, a simulation where all the signs are written in katakana and the famous Shibuya 109 building stands next to a fictional 108 building. The only thing the inhabitants know is real is the pain they feel. The people trapped here are all fifteen years old, and they live under the constant threat of a mysterious executioner named Piece, who appears to kill those deemed "broken" by the system. Once killed, a person is eventually reset into the world with a new name, new identity, and no memories of their previous life, with their former self erased from the memories of everyone else.

Tsuyoshi quickly discovers he is a member of one of three rival gangs that fight for territory in this closed-off city. There is Palhands, led by the冷酷 and ambitious Ryuugo; Lovegen, led by the tough and headstrong Asagi; and Bunkamu, led by the easygoing DJ who loves music and dance. After helping Asagi in a skirmish, Tsuyoshi is taken in by her and learns the brutal rules of their existence. He soon encounters Ema, a quiet and solitary girl who possesses a unique power. Unlike anyone else, Ema can summon a suit of armor using an ability called Merge and temporarily destroy Piece, though the executioner always returns. She is the only person who, like Tsuyoshi, remembers those who have been killed and reset. She reveals that Tsuyoshi's real name is not Shouta, the identity assigned to him by his gang, and that his past self was once her boyfriend, a person named Revu.

As Tsuyoshi struggles to recover his lost memories and understand his connection to Ema, he grows close to Asagi, who develops feelings for him. Asagi is marked by Piece for death but survives, becoming an outcast known as a "yojire." Tsuyoshi repeatedly tries to break the fundamental law of their world and escape the physical boundaries of Shibuya, but each attempt fails. In a desperate bid for freedom, Asagi is killed by Piece and later returns as Miu, a gothic lolita with a completely different personality who has no memory of Tsuyoshi or her life as Asagi. Tsuyoshi is devastated to realize that only he and Ema remember who she was. The discovery that all inhabitants who die are replaced by reset copies with erased pasts forces Tsuyoshi to question his own identity. He learns that he has already died and been reset at least once before, transitioning from Revu to his current self, Tsuyoshi.

The truth about Shibuya is gradually revealed. The city is not a supernatural prison but a highly advanced behavioral correctional facility and virtual education system, designed by a homeless professor named Ootomo to rehabilitate troubled teenagers. Kengo, the neutral tattoo artist who runs a shop that serves as a sanctuary for all the gangs, is secretly an administrator monitoring the system from within. He answers to a cold-hearted chairman named Igaya. The floating blimp with a giant eye that watches over the city is part of their surveillance apparatus. Ema herself was the catalyst for the system's creation after she committed a凶恶 crime in the real world. Her ability to fight Piece is a flaw in the system, and in reality, she lies in a vegetative state in a special room.

After Asagi's death and rebirth as Miu, Tsuyoshi is manipulated by Ryuugo and forced to fight Piece directly. He survives by burning a marked phone strap, a trick that allows him to temporarily defeat the executioner without Ema's help. Meanwhile, Ema discovers Kengo's role as a controller, and he punishes her by siccing two Pieces on her. She is saved by Professor Ootomo, who gives Tsuyoshi a video message from his past self, Revu, pleading with Ema to escape with him. Tsuyoshi reconciles his past and present identities and convinces Ema to join him in trying to break out of Shibuya for good. They fight their way through waves of Pieces sent by Kengo, who finally reveals the full scope of his power, unleashing an army of robots. Tsuyoshi sacrifices himself to save Ema, which allows him to briefly wake up in the real world. He finds himself in a classroom where all the other fifteen year olds, including his friends, are asleep in desks, hooked up to the system. He discovers Ema's comatose real body, but before he can do more, he is forcibly returned to the virtual Shibuya and reset, once again waking up in an alley with no memories, restarting the loop.

This time, however, Tsuyoshi has hidden a piece of Ema's nail art in his mouth, which survives the reset. He regains his memories and finds the world has been restored to its initial state, but with everyone's memories wiped, including Ema, who is now the cold boss of Palhands. He manages to trigger her memories by showing her the nail, and her power returns. Ema destroys the monitoring blimp and, using her full strength, restores the true memories of all the inhabitants, including Asagi and Ryuugo. They learn that the world is set to end, with a clock counting down to its destruction. The chairman transforms into a final, powerful Piece to stop them from escaping. The group works together to defeat him. As they reach the boundary of Shibuya, Tsuyoshi convinces Ema to leave with him, but she reveals that because her real body is brain-dead, she can only exist inside the virtual world. Faced with freedom in a world without her or a return to the simulation, Tsuyoshi makes his final choice. He turns his back on the exit and goes back into Shibuya to be with Ema, accepting the artificial world as his reality for the sake of the person he loves.