The film begins in 2013. Deep beneath the Pacific Ocean, a fissure opens up, that leads to another dimension. Through the fissure, a giant monster appears, and destroys portions of San Francisco. After many days and countless lives, the creature is defeated by human military forces.
However, what seemed to be an isolated attack builds, as more creatures begin to come through the fissure, attacking coastal cities around the Pacific. The World unites to stop the invaders, and build The Jaeger Program: a series of giant mechanical 'monsters,' intended to stop the creatures.
Original tests to have one pilot per Jaeger prove unsuccessful, as the test subjects were not able to handle the stress and strain of controlling such a huge robot by themselves. It was then decided that each Jaeger would be piloted by two pilots, their memories linked together in The Drift, synchronizing their movements to maneuver the massive machines.
As the Jaegers go to work, they begin to turn the tides, and take down the creatures (known as Kaiju). Pretty soon, the world is enthralled by the Jaegers and their pilots. They become celebrities, and even have merchandise made. As well, the dead Kaiju are soon seen as a black-market commodity, their parts sold off for various collections and medicinal purposes.
But just as the war seems to be turning in humanity's favor, the Kaiju's attacks become more frequent and more brutal.
In 2020, seven years after the fissure opened, one of the more famous Jaeger duos, Raleigh Beckett (Charlie Hunnam), and his older brother, Yancy (Diego Klattenhoff) have become heroes with an impeccable record of defeating Kaijus. Pilots of the Jaeger named "Gipsy Danger," they are sent off to stop a category 3 Kaiju heading towards Anchorage. The beast is larger and more powerful than previous category 3s and will be a challenge for the team. Though the information on their monitors shows a fishing boat in the path of the attack, the Becketts are told their priority is to protect Anchorage.
Even so, they disobey orders, and still save the fishing boat, but end up being brutally attacked by the Kaiju, which rips off the Gipsy Danger's left arm, and tears away a chunk of the vehicle's helmet, sending Yancy to his death. Raleigh is devastated by his brother's death, and barely manages to pilot Gipsy Danger on his own and finishes the battle. Raleigh later pilots the Jaeger to a remote beach where he's found exhausted and emotionally devastated from his brother's death.
After the attack, Raleigh leaves the Jaeger Program, and goes to find work wherever he can. Five years later, he finds work along the Western coast of the United States as a construction worker, helping build a giant wall that is meant to keep the Kaiju out.
In the 5 years since Raleigh was with the Jaeger program, numerous countries have called for the program to be terminated due to spiraling casualties of Jaeger pilots in the increased Kaiju attacks. Many assume that building the walls will make them safe, but the head of the program named Stacker Pentecost (Idris Elba), claims that the world's leaders are making a terrible mistake. Even though Pentecost claims the program is still viable, it is relocated to Hong Kong and given 8 months of funding before the program will be permanently retired.
Working on the wall near Sitka, Alaska, Raleigh sees television reports that a Kaiju has broken through the one surrounding Sydney Harbor in Australia. Luckily, a Jaeger named Striker Eureka is able to take it down. After seeing the news report, Raleigh is surprised when a helicopter lands near his building area, with Pentecost requesting he come along. Raleigh is reluctant to join the Jaeger program again, however, Pentecost convinces him that he belongs in the pilot's seat.
Raleigh is then flown to the Hong Kong Base (known as 'The Shatterdome'), where he meets Mako Mori (Rinko Kikuchi). Mako tells Raleigh that she has studied his moves during his years in action, and how to be a Jaeger pilot, Raleigh notes she seems apprehensive.
Pentecost also introduces Raleigh to two scientists under their command. One of them, Dr Newton Geiszler (Charlie Day), is an obsessive 'Kaiju Fanboy,' who studies the creatures through salvaged organs and other parts. The other is Dr Gottlieb (Burn Gorman), who is a more 'practical' man, and is using his mathematical skills to try and pinpoint the frequency of creatures coming through the ocean rift.
Within the Shatterdome, the last remaining Jaegers and their crews have been assembled: The 3-pilot Crimson Typhoon (from China), Cherno Alpha (from Russia), Striker Eureka (fresh from its stint in Australia), and (to Raleigh's surprise) Gypsy Danger. However, since her encounter 5 years ago, she has been rebuilt and retrofitted for more extreme combat.
Raleigh questions Pentecost on just what their plan is. Pentecost explains that are formulating a plan to drop a nuclear weapon into the channel between dimensions. If it works, the channel will be destroyed, stopping any further Kaiju from coming through. Though the plan of attacking the channel has failed in the past, the program's leaders are confident they will be successful this time if all the remaining Jaegers attack simultaneously.
Pentecost soon after meets again with Geiszler and Gottlieb. Gottlieb predicts that mathematically, the number of Kaiju coming up through the rift is increasing. Geiszler meanwhile, wonders if they can learn more about the Kaiju, if they are able to 'drift' with its brain. Having a portion of one, he is eager to test his theory, but is denied by Pentecost.
Without his brother, Raleigh is tasked with helping to find a replacement. However, during a training and reflex exercise, Raleigh is a little incensed when Mako keeps calling him out regarding the number of moves to take down his opponent. Inquiring why she is being so vocal, she responds that he could have taken down his opponents with a shorter amount of moves. After winning approval from Pentecost, Raleigh spars with her, and is amazed at her prowess. He proclaims that she should help him co-pilot Gypsy Danger, but Pentecost refuses.
Eventually, another pilot is chosen for Raleigh, but at the last minute, Mako is given permission. A test-run of Gypsy Danger within the Shatterdome appears to be going well, until during the Drift session, Mako gets locked into a tragic memory, and almost sets off the Jaeger's plasma cannon within the dome.
Following the incident, Raleigh understands more about Mako and Pentecost. When Mako was a child, she lost her family to a Kaiju attack in Tokyo, Japan. Just when it seemed the creature was going to kill her, a Jaeger was deployed that stopped it. The pilot of the Jaeger was Pentecost himself who is revealed to be able to pilot a Jaeger by himself. Even with her becoming unfocused in the drift, Raleigh still wants Mako as his partner, but is again rebuffed by Pentecost.
Meanwhile, Dr Geiszler has hooked up a crude connection machine, and hooks into the Kaiju brain in his lab. After Gottlieb shuts it down, Geiszler reports to Pentecost and his men that the link allowed him a glimpse into the other side of the portal. Geiszler had theorized that based on some Kaiju samples, that what they were seeing coming through were cloned creatures, and his drift vision appears to corroborate the theory. Unfortunately, the Kaiju brain has been damaged, and Geiszler needs a fresher brain in order to learn more. Pentecost gives him a small card, and sends him to Hong Kong to look for a man named Hannibal Chau.
Geiszler heads to Hong Kong where he finds Chau, who is actually an American going under an alias. Chau is a dealer in Kaiju remains, collecting them from battle sites and dealing them on the black market. Geiszler is sufficiently impressed with Chau's secret room containing live specimens that could be useful in his theory. Geiszler bats around Chau's arrogance and questioning demeanor, until he mentions how he drifted with a Kaiju brain, leading Chau to question that if he connected to the other side, what's to say those on the other side don't know what he now knows?
Shortly after their discussion, two Category 4 Kaijus surface near Hong Kong. Pentecost sends out the Crimson Typhoon and the Cherno Alpha to fight the creatures, with Striker Eureka as backup to protect the City's coastline.
Just as discussion had seemed to point to the Kaiju becoming more dangerous, the two that have emerged come with extra accoutrements. One contains a pouch containing acid that melts away Cherno Alpha's armor before they are eventually destroyed. Crimson Typhoon's crew take her into the fight, but she is soon overwhelmed by the two.
The father/son team piloting Striker Eureka abandon their orders to protect Hong Kong, and go at the creatures. However, the other Kaiju lets loose an EMP burst that disables Striker Eureka, and the equipment in the Shatterdome. With 2 hours until the system can be rebooted, Striker Eureka is dead in the water until Raleigh gives a solution: though the newer models of Jaeger are digital, the Gypsy Danger is analog and thus more resistant to EMP attacks.
Pentecost sends out Raleigh and Mako, who end up destroying the EMP-bursting Kaiju after a protracted battle, but the other one ends up heading into Hong Kong.
While Chau and his associates have fled to their bunker, Dr Geiszler has been pushed out into the streets, and into a fallout shelter. However, when it sounds like the creature has settled directly over them, he begins to panic that Chau may have been right, and that it may be looking for him. As if to answer that the ceiling caves in, and the Kaiju attempts to reach him.
Just then Gypsy Danger appears and distracts the Kaiju. The battle goes through many buildings, but takes a turn when the creature suddenly sprouts wings and begins to carry the Jaeger into Earth's upper atmosphere. Utilizing the Jaeger's chain-sword, they manage to destroy it before plummeting back to Earth, barely regaining control of the Jaeger as a team to make a safe landing.
Raleigh and Mako return to the Shatterdome to cheers as the pilots of the Striker Eureka also voice their thanks and appreciation. During the jubilation, Raleigh notes Pentecost bleeding slightly from both nostrils. In private, Pentecost explains how, in the earlier days of the Jaeger program, shielding from nuclear contaminants had not been considered and that his condition has been worsening over time.
Meanwhile, Geiszler has returned to Chau and demands claim over the dead Kaiju's brain. Chau's men attempt to get to it, but find that the Kaiju is actually pregnant. Just then, an infant Kaiju breaks through a slit in the side of its Mother, and attempts to escape before falling down, seemingly choking on it's own umbilical cord. As Chau gloats over the dead infant Kaiju, claiming he'd known it couldn't survive very long outside it's mother, the creature rears up and swallows him whole, finally dying in the street.
Dr Gottlieb soon shows up in Hong Kong with Geiszler's machine, and though the first attempt almost killed him, Gottlieb volunteers to drift with the other scientist, to cooperate in learning more through the infant Kaiju's brain.
Plans are soon made to set up the Gypsy Danger and Striker Eureka to deliver the warhead to the undersea rift, but due to the father in Striker Eureka's team having sustained an injury to his arm, a replacement must be found. Pentecost surprises everyone when he takes the role. However, the strain of piloting a Jaeger could prove fatal to Pentecost, but he volunteers anyway.
As the two Jaegers near the rift, Geiszler and Gottlieb rush into the Shatterdome's control room, and explain that the plan will not work. The channel between dimensions will only allow in a Kaiju, the very reason for the previous failures to destroy the channel with other nuclear weapons: if they attempt to drop the warhead into the channel, it'll just deflect out. The two Jaegers battle two Kaiju guarding the rift as a third Kaiju, a Category 5, larger more powerful than the previous creatures, emerges from the rift.
Gypsy Danger and Striker Eureka sustain heavy damage in the battle. Striker Eureka detonates its nuclear core to take out the defending Kaiju and give Gypsy Danger a chance to enter the rift. Gypsy Danger drags a dead Kaiju into the rift, bypassing the code that would reject any non-kaiju. Inside the Kaiju world, Raleigh ejects Mako in a life pod and manually initiates the detonation of the nuclear core. As Gypsy Danger enters the other dimension, Raleigh ejects in his own pod before Gypsy Danger explodes and collapses the rift, ending the Kaiju threat once and for all. On the surface of the Pacific Ocean, both pods reach the surface. For a brief period it seems that Raleigh may be dead but he awakens, much to Mako's joy.
A mid-credits scene reveals that Hannibal Chau survived being swallowed by the baby Kaiju by cutting his way out with a pocket knife. He angrily asks where the shoe he lost is.