In Muromachi Japan, an Emishi village is attacked by a demon. The last Emishi prince, Ashitaka, kills it before it reaches the village, but its corruption curses his right arm. The curse gives him superhuman strength, but will eventually spread through his body and kill him. The villagers discover that the demon was a boar god, Nago, corrupted by an iron ball lodged in his body. The village’s wise woman tells Ashitaka that he may find a cure in the western lands Nago came from, but he cannot return to his homeland. Before Ashitaka leaves, his sister Kaya gives him her crystal dagger so that he will not forget her.
Heading west, mounted on his red elk, Yakul, Ashitaka meets Jigo (“Jiko-bō” in the original Japanese version), an opportunist posing as a monk, who tells Ashitaka he may find help from the Great Forest Spirit, a deer-like animal god by day and a giant nightwalker by night. Nearby, men herd oxen to Irontown (“Tataraba” in Japanese), led by Lady Eboshi, and repel an attack by a wolf pack led by the wolf goddess Moro. Riding one of the wolves is San, a human girl raised by Moro after her parents abandoned her. Ashitaka discovers two injured Irontown men and carries them through the forest, where he encounters many kodama and glimpses the Forest Spirit. In Irontown, Ashitaka learns that Eboshi built the town by clearcutting forests to claim ironsand and produce iron, leading to conflicts with the forest gods and Asano, a local daimyō. Irontown is a refuge for social outcasts, including former prostitutes who now work for Eboshi in her foundry and lepers employed to manufacture firearms; it was one of these guns that had wounded Nago. Eboshi also explains to Ashitaka that she intends to kill the Forest Spirit, believing that its blood can cure anything and that San (whom she calls Princess Mononoke) will become fully human once the forest is cleared and the wolves killed.
San infiltrates Irontown to kill Eboshi, and they engage in a one-on-one duel. Ashitaka attempts to break up the fight with the curse now manifesting as a worm-like specter on his right arm, but when the talks fail he knocks both San and Eboshi unconscious. As Ashitaka leaves, San slung over his shoulder, he is unintentionally shot by a villager, but the curse gives him the strength to carry San out of the village. San awakens and prepares to kill the weakened Ashitaka, but hesitates when he tells her that she is beautiful. After a group of apes attempt to claim Ashitaka so that they may eat him and claim his strength only to be scared off by the wolves when they insult San, she convinces Yakul to help her carry Ashitaka to safety. She takes him to the forest, and decides to trust him after the Forest Spirit saves his life and learning from Yakul of his people, their village and their forest, going so far as to aid him in eating when he is too weak to chew. A boar clan, led by the blind boar god Okkoto, plans to attack Irontown to save the forest, in spite of Moro’s insistence that they will be slaughtered. Okkoto also thanks Ashitaka for killing Nago, but tells him that he will have to kill him if they meet again. Eboshi prepares for battle and sets out to kill the Forest Spirit with Jigo, who is working for the government; she intends to give the god’s head to the Emperor who believes the Forest Spirit’s blood will make him immortal in return for protection from Lord Asano.
Ashitaka recovers from his wound but remains cursed and is told to leave the forest by Moro under pain of death after he asks her to let San leave with him. Before leaving, he also gifts San Kaya’s crystal dagger. He then returns to Irontown to find it besieged by samurai, and heads out to warn Eboshi. The boar clan is annihilated in battle, and Okkoto is corrupted by his wounds. Jigo’s men disguise themselves in boar skins and trick the rampaging Okkoto into leading them to the Forest Spirit. Overcome with fear, Okkoto transforms into a demon. San tries to stop Okkoto, but is swept up in his demonic corruption, becoming trapped. Moro intervenes and Ashitaka dives into the corruption, but is cast out into the nearby lake. The Forest Spirit then euthanizes Okkoto and Moro, allowing Ashitaka to free and revive San. As the Forest Spirit transforms into the nightwalker, Eboshi decapitates it. It then bleeds a black ooze which spreads over the land, killing anything it touches as the nightwalker searches for its head, which Jigo steals. The forest and kodama begin to die; Moro’s head comes alive and bites off Eboshi’s right arm, but she survives with Ashitaka’s aid. This initially angers San who reaffirms her hatred for humans and her identity as a wolf, but after embracing Ashitaka who tells her that there is still hope, she decides to aid him and the humans.
After the samurai either flee or are killed by the ooze and the majority of Irontown is evacuated as the ooze advances, Ashitaka and San pursue Jigo and retrieve the head after a brief scuffle, returning it to the Forest Spirit. The Spirit dies as the sun rises, but its form washes over the land and heals it, making the plants on the once desolate hills near Irontown bloom again while lifting Ashitaka’s curse. Ashitaka stays to help rebuild Irontown, but promises San he will visit her in the forest, with San saying she loves him. Eboshi reunites with the townspeople and vows to build a better town. The forest begins to regrow, and a kodama emerges from the undergrowth.