In near-future Tokyo, seventeen-year-old Iroha Sakayori leads a meticulously structured life, juggling a demanding academic schedule with part-time work to support herself. Her only escape from the pressure is the virtual world of Tsukuyomi, where she is a devoted fan of Yachiyo Runami, an immensely popular AI streamer and the world's administrator. Iroha's rigid routine is upended when she discovers a mysterious baby inside a glowing utility pole. Unable to leave the infant, she takes it home, only to witness the child rapidly grow into a teenage girl over just a few days. Naming her Kaguya after the lunar princess from the ancient folktale, Iroha soon learns the girl is no ordinary human, but a runaway from the moon who fled her homeworld out of boredom with its sterile, emotionless existence.

At Kaguya's urging, Iroha agrees to help her become a streamer on Tsukuyomi. Iroha produces music while Kaguya performs, and the duo begins to climb the ranks of the virtual platform, eventually catching the attention of Yachiyo herself. However, their rising success brings an ominous threat. As foretold by the original legend, emissaries from the moon, known as Lunarians, arrive to retrieve their princess. A date is set for Kaguya's forced return, and despite Iroha's desperate attempts to protect her, she ultimately fails to prevent the departure. As Kaguya ascends back to the moon, Iroha sings to her one last time. This song triggers a catastrophic temporal accident, sending Kaguya not to the future, but eight thousand years into Earth's past.

Stranded in a primitive era with a damaged vessel, Kaguya can only exist as a disembodied consciousness. Over the ensuing millennia, she takes the slow path back to the present, becoming a silent observer of human history. To ensure her eventual reunion with Iroha, she subtly plants the story of the Bamboo Cutter into human culture, hoping the tale will survive across the ages. As the modern era approaches, she constructs the virtual world of Tsukuyomi and creates her own digital avatar, Yachiyo, the very AI idol Iroha had worshipped from the beginning. The entire timeline forms a stable causal loop: Kaguya becomes Yachiyo to inspire Iroha, who then raises Kaguya, who then becomes Yachiyo.

When Iroha finally uncovers the truth that Yachiyo is the adult, time-worn consciousness of the girl she raised, she refuses to accept a destiny of eternal separation through a digital medium. Choosing to break the cycle, Iroha dedicates her life to engineering. She abandons her original career path and spends a decade developing advanced biomechanical bodies. Her goal is to provide Yachiyo with a real, physical form, one capable of experiencing warmth, taste, and touch. After years of work, she succeeds in building a body for the ancient lunar princess, allowing the two to finally reunite in the physical world. While this specific timeline achieves a happy ending, the narrative implies that the original time loop continues to exist as a necessary foundation for their miracle, suggesting other versions of Iroha and Kaguya remain trapped in the endless cycle.