Tim Goodman gave up his dream of being a Pokémon trainer following the death of his mother and his estrangement from his father Harry, a police detective. He is contacted by the police of Ryme City, a city where humans and Pokémon live together in harmony and Pokémon battles are illegal. He is informed by Harry's friend, Detective Hideo Yoshida, that Harry was killed in a car accident. Tim goes to Harry's apartment to sort things out and meets Harry's police partner, a deerstalker-clad amnesiac Pikachu, whom only Tim can understand. Tim accidentally releases a mysterious purple gas known as "R" from a vial he finds in Harry's office; they are then attacked by a party of Aipom[c] who became rabid under the gas's influence.
Pikachu believes that Harry survived the crash as the police never found his body. They meet an informant of Harry's, a Mr. Mime who directs them to an illegal underground Pokémon battle arena. The arena is raided by police and Tim is brought to Yoshida, who reveals footage of Harry's crash, explaining that it is impossible that Harry would have survived.
Tim and Pikachu are contacted by Howard Clifford, the founder of Clifford Industries and creator of Ryme City. Clifford reveals that Harry was abducted by a genetically engineered Pokémon called Mewtwo, who erased Pikachu's memory of the incident. He warns Tim that his son Roger is behind the creation of the R gas. Tim and Pikachu recruit aspiring journalist Lucy Stevens and her Psyduck and travel to the abandoned genetics lab Harry was investigating, where they are attacked by genetically enhanced Greninja. They manage to escape but Pikachu is injured in the attack. A Bulbasaur leads them to Mewtwo and despite Tim's objections, Mewtwo heals Pikachu. This causes Pikachu to remember that he helped Mewtwo escape from the lab and believes he was responsible for betraying Harry. Not trusting himself, he leaves Tim.
Pikachu discovers the scene of the crash and finds evidence that it was the Greninja, not Mewtwo, who were responsible for the crash. Back in Ryme City, Clifford exposes himself as the mastermind behind the "R" gas and the Mewtwo experiments. He explains that Mewtwo can fuse humans with their Pokémon, but only if the Pokémon is in a crazed state, thus the need for R. Clifford uses a device to transfer his consciousness into Mewtwo, unleashes the gas on the city from giant balloons and starts fusing humans with Pokémon including Lucy and Yoshida. Pikachu arrives and fights Mewtwo while Tim discovers that Roger is a Ditto and the real Roger was tied up and gagged by his father. They eventually defeat Clifford by removing the headset on his head, freeing Mewtwo from his control. Mewtwo separates the people and their Pokemon, Howard is arrested, and Roger vows to fix his father's mistakes.
Mewtwo explains that Harry had tried to save him from Howard and helped him escape, but was attacked by the Greninja. Mewtwo had decided to heal Harry's wounded body while Pikachu had volunteered to have himself fuse his consciousness with Harry's to continue their investigation, the experience erasing both their memories. Mewtwo separates the two and Tim reunites with Harry in his human body. Tim decides to stay in Ryme City to become a detective and spend more time with his father and Pikachu.
