In the year After Colony 196, one year after the end of the Gundam Wing TV series, the war between the Earth and the space colonies has come to a close. OZ is almost entirely gone with the death of Treize Khushrenada, and the current government, the Earth Sphere Unified Nation, has the organization called the Preventers in place to prevent any hostile conflicts. Feeling that there is no need for them anymore, the Gundam pilots, with the exception of Wufei Chang, send their Gundams into the sun on the retired MO-II resource satellite. On the space Colony L3 X-18999 however, there is a rebellion developing hidden from the outside world. When Vice Foreign Minister Relena Darlain visits the colony to help negotiate on certain issues, she is kidnapped by the rebels, and when she awakes, discovers the rebellion is led by Treize's daughter, Mariemaia Khushrenada. When the Gundam pilots investigate, they discover Mariemaia is a mere puppet being manipulated by her grandfather Dekim Barton. Dekim is trying to go through with a revised version of Operation Meteor, where X-18999 would be dropped onto Earth if the ESUN does not cooperate, and so the Gundam pilots plan a way to stop him.
While Quatre and the Maganac Corps take a high-speed shuttle to catch up with the resource satellite and retrieve the Gundams, Heero, Duo, and Trowa go to stop X-18999 from falling onto Earth by reinitializing the orbit stabilization systems on the colony. When Heero meets up with his Gundam, he runs into an angry Wufei upon preparing for atmospheric reentry. Wufei and Heero end up dueling each other as they start to enter the Earth's atmosphere, all while questioning each other's ideals and philosophies. Eventually Heero is able to convince Wufei to stand down, but by then Wing Zero has taken a beating and so falls into the ocean. Meanwhile, Duo, Trowa, and Quatre, having met up with their Gundams, set off to aid Zechs and Noin in capturing the Brussels Presidential Residence, where Mariemeia and Dekim have taken up residence.
Making an effort not to kill any of the pilots of the MMS-01 Serpent Mobile Suits in Mariemeia's forces, Duo, Trowa, Quatre, Zechs, and Noin painstakingly work to only disable as many of the Serpent Mobile Suits as possible. The movie comes to a climax when the five of them run out of ammunition, still surrounded by enemy forces, when all of a sudden Wing Zero is spotted in the sky with it's Twin Buster Rifle pointed straight at the Presidential Residence. Heero hails the enemy base to confirm their shields are active, and when Mariemeia arrogantly tells him he's powerless to stop them so he can try all he wants, he simply acknowledges and fires. The first shot takes out more than half of the base's shield's strength, and when Dekim realizes the danger they are in, quickly orders all Serpents to shoot down Wing Zero. At this point, Wing Zero is already in pretty bad shape, and Heero, knowing that Relena is inside the base with them, pauses to consider her before he fires again. In the process, Wing Zero shakes itself apart from the recoil of the Twin Buster Rifle, and the Presidential Residence suffers heavy damage, though the main control center where Relena, Mariemeia, and Dekim are at remains fortunately intact.
It is at this point that Wufei shows up in his Altron Gundam, standing over the people as they protest to Mariemeia's forces in the streets. Dekim, desperate that he's losing control of the situation, tells Mariemeia to take the stage and proclaim herself as rightful ruler of the people. Relena however, tells Mariemeia that her philosophy is wrong, and that now she should know what the right thing to do is. Dekim, angry at Relena for interfering, accuses Relena of brainwashing Mariemeia and prepares to shoot her. Right as he shoots however, Mariemeia pulls Relena out of the way and gets shot instead, and Dekim is shot in the head by one of his subordinates. After this, Heero walks in and tries to take the blame for shooting Mariemeia and vows never to kill again, before falling unconscious.
A day or two passes, and as we enter the afterward, the Gundam pilots all decide to self-detonate their Gundams, and Noin joins up with Zechs to work on a terraforming project on Mars. At this point the movie is over, but in the theatrical version we see as the credits roll that Wufei joins Sally Po to work with the Preventers, Duo and Hilde join up again on the space colonies, Lady Une becomes Mariemeia's caretaker, and Relena continues to work in the ESUN government. According to the narrator at the end, as the calendar year enters AC 197 peace finally returns to Earth and outer space, and weapons like Mobile Suits and the Gundams, are never seen again.