While in Camp Half-Blood, Percy Jackson recounts the story of Thalia and her sacrifice. A young Annabeth, Luke, Grover and Thalia are running to Camp Half-Blood while being pursued by monsters. Thalia sacrifices herself to get the others into the camp, and her father Zeus turns her into a tree which forms a barrier around it. After his quest for Zeus’s bolt has faded in popularity, Percy is called a one-quest wonder by camp bully, Clarisse La Rue, but Annabeth and Grover support him.
One day, a cyclops named Tyson enters the camp, revealed as a son of Poseidon, and therefore, Percy’s brother. After the campers get attacked by a Colchis bull, they realize that Thalia’s tree has been poisoned by Luke and they are vulnerable to attack. Percy visits the Oracle, who tells him of a prophecy of a half-blood of the eldest gods either saving or destroying Olympus. Chiron tells Percy that he is the only living, human half-blood of the eldest gods, so the half-blood in the Prophecy may refer to him. Annabeth and Grover learn about the Golden Fleece, which has the power to heal anything, and propose a quest in which they retrieve the Fleece and use it to heal Thalia’s tree. Mr. D chooses Clarisse to lead the quest, much to Annabeth’s and Percy’s dismay.
Percy convinces Grover and Annabeth to accompany him on the quest, and Tyson joins them. Annabeth hails the Chariot of Damnation (a New York City cab), and Percy threatens the three drivers (the Graeae) to tell him of his prophecy. The sisters give him coordinates for the Sea of Monsters (the Bermuda Triangle) before ejecting the group from the cab in Washington D.C. for lacking drachmas. While walking down the street, Grover is kidnapped by Chris Rodriguez and taken to Luke. Percy, Annabeth, and Tyson first locate Luke with the help of Hermes, then ride a Hippokampos to his yacht, the Andromeda. Luke reveals his plan to revive Kronos using the Fleece so Olympus will be destroyed. The group are then locked in the brig, though they later escape when Percy uses his ability to manipulate water.
The group is consumed by Charybdis, and they discover Clarisse in the monster’s stomach. Percy and Clarisse work together to escape Charybdis by shooting a hole through its gut, and soon they arrive at Circeland, Polyphemus’s lair, off the coast of Florida. Percy finds Grover, and the five escape Polyphemus, retrieving the fleece and trapping him in his cave. Afterwards, Luke arrives and demands the fleece from Percy, who refuses. Luke shoots a crossbow bolt at Percy, but Tyson takes the bolt in the chest and falls into the water below.
Luke places the fleece on the sarcophagus to revive Kronos and Annabeth encourages Percy to take leadership. The team escapes captivity, and Percy grapples with Luke over the Fleece, like the prophecy said they would, but Luke easily gains the upper hand. Luke is suddenly thrown away by Tyson, revealed to have survived his wound due to the water healing it, as he is Poseidon’s son. Kronos rises from the sarcophagus and consumes Luke and Grover before battling Percy. Percy realizes that Riptide is the “cursed blade” of the prophecy and slices Kronos into pieces imprisoning Kronos in the sarcophagus once again, causing him to regurgitate Grover and Luke, the latter landing in Polyphemus’s Lair; Polyphemus subsequently prepares to eat Luke. Their victory is short lived as Annabeth is stabbed by the Manticore, who is killed in turn by Clarisse and Grover. Annabeth dies in Percy’s arms but is resurrected by the Fleece. Percy then gives the fleece to Clarisse, and they return to Camp Half-Blood. Clarisse places the fleece on Thalia’s tree. The group returns the next day to find Thalia alive, as the fleece returned her to human form.
Percy realizes that Thalia, as the daughter of Zeus, is another possible child of the prophecy about either preserving or destroying Olympus. The film ends showing the sarcophagus with Kronos’s remains in it glowing, implying that Kronos still has some degree of his power and is still planning to return.