A group of scientists have been working in a secret laboratory, attempting to create the strongest Pokémon yet in existence. For this, they have taken DNA from a fossilized hair sample (discovered in the Amazon) of the legendary Pokémon Mew, using the elusive creature's genetic code to bio-engineer Mewtwo. Unaware of their creation's power, the scientists and their laboratory are destroyed by the awakening Mewtwo. Angered at his creators for making him the Pokémon equivalent of Frankenstein's monster, Mewtwo swears revenge on the world.

Ash Ketchum is relaxing with his pals Misty and Brock when he is challenged to a Pokémon battle by a neophyte trainer. Ash, aided by his favorite and first Pokémon, Pikachu, easily defeats the trainer. A hologram of a beautiful girl appears, inviting the trio to a party held at the palace on New Island, hosted by her master, "the world's greatest Pokémon trainer." They accept the invitation. Meanwhile, Ash's arch rivals, Team Rocket (the duo of Jessie and James and their Pokémon mascot, Meowth), secretly watch the hologram and vow to attend the party as well.

All of the trainers hoping to attend the party gather at the ferry station seeking passage to New Island. A hurricane shuts the ferry service down, but some enterprising trainers (including Ash, Misty and Brock and Team Rocket) use their Pokémon to cross the dangerous waters. Once at the castle, the trainers are shown to a great hall by Joy, the beautiful girl who appeared in their hologram invitation. She introduces the trainers to their host-Mewtwo, a master trainer and the world's most powerful Pokémon, who reveals his plan to hijack the globe with a specially created race of Super-Pokémon.