By 2154, humans have depleted Earth’s natural resources, leading to a severe energy crisis. The Resources Development Administration (RDA for short) mines for a valuable mineral – unobtanium – on Pandora, a densely forested habitable moon orbiting the gas giant Polyphemus in the Alpha Centauri star system. Pandora, whose atmosphere is poisonous to humans, is inhabited by the Na’vi, 10-foot tall (3.0 m), blue-skinned, sapient humanoids who live in harmony with nature and worship a mother goddess called Eywa.
To explore Pandora’s biosphere, scientists use Na’vi-human hybrids called “avatars”, operated by genetically matched humans; Jake Sully, a paraplegic former Marine, replaces his deceased identical twin brother as an operator of one. Dr. Grace Augustine, head of the Avatar Program, considers Sully an inadequate replacement but accepts his assignment as a bodyguard. While protecting the avatars of Grace and fellow scientist Dr. Norm Spellman as they collect biological data, Jake’s avatar is attacked by a thanator and flees into the forest, where he is rescued by Neytiri, a female Na’vi. Witnessing an auspicious sign, she takes him to her clan, whereupon Neytiri’s mother Mo’at, the clan’s spiritual leader, orders her daughter to initiate Jake into their society.
Colonel Miles Quaritch, head of RDA’s private security force, promises Jake that the company will restore his legs if he gathers information about the Na’vi and the clan’s gathering place, a giant tree called Hometree, on grounds that it stands above the richest deposit of unobtanium in the area. When Grace learns of this, she transfers herself, Jake, and Norm to an outpost. Over the following three months, Jake grows to sympathize with the natives. After Jake is initiated into the tribe, he and Neytiri choose each other as mates, and soon afterward, Jake reveals his change of allegiance when he attempts to disable a bulldozer that threatens to destroy a sacred Na’vi site. When Quaritch shows a video recording of Jake’s attack on the bulldozer to Administrator Parker Selfridge, and another in which Jake admits that the Na’vi will never abandon Hometree, Selfridge orders Hometree destroyed.
Despite Grace’s argument that destroying Hometree could damage the biological neural network native to Pandora, Selfridge gives Jake and Grace one hour to convince the Na’vi to evacuate before commencing the attack. While trying to warn the Na’vi, Jake confesses to being a spy and the Na’vi take him and Grace captive. Seeing this, Quaritch’s men destroy Hometree, killing Neytiri’s father (the clan chief) and many others. Mo’at frees Jake and Grace, but they are detached from their avatars and imprisoned by Quaritch’s forces. Pilot Trudy Chacón, disgusted by Quaritch’s brutality, carries them to Grace’s outpost, but during the escape, Quaritch fires at them, hitting Grace.
To regain the Na’vi’s trust, Jake connects his mind to that of Toruk, a dragon-like predator feared and honored by the Na’vi. Jake finds the refugees at the sacred Tree of Souls and pleads with Mo’at to heal Grace. The clan attempts to transfer Grace from her human body into her avatar with the aid of the Tree of Souls, but she dies before the process can be completed.