The film is set in the Venetian-esque city of Alto Mare, protected by the dragon siblings Latias and Latios. Their father, also a Latios, is said to saved the city from an evil Pokémon Trainer and their Kabutops and Aerodactyl whilst transforming the city’s streets into canals. The citizens built the Defence Mechanism of Alto Mare (or “D.M.A.” for short) to protect the city if necessary, but have never had to use it. The father Latios died, leaving behind the Soul Dew, said to contain his own soul and can power the D.M.A.
In the present day, Team Rocket agents Annie and Oakley acquire a book detailing the history of Alto Mare, plotting to control the D.M.A. Ash, Misty, and Brock are touring se by an invisible Latias. Annie and Oakley stalk Latias, who disguises herself as a human girl, trying to capture her using their Espeon and Ariados. Ash and Pikachu come to the rescue, guiding Latias to safety but she vanishes when Ash’s back is turned.
Visiting the museum, the trio meet the curator Lorenzo who details Alto Mare’s history, the D.M.A., and the fossilized Pokémon on display. Ash spots a girl, Bianca, who resembles Latias’ disguise, and chases her across the city, but she does not recognise him. Latias herself appears, guiding Ash and Pikachu to a hidden garden where she and Latios live, protected by Lorenzo and Bianca, his granddaughter. While Pikachu plays with Latias and Latios, Lorenzo shows Ash the Soul Dew, unaware that Annie and Oakley’s drone has infiltrated the sanctuary.