The movie starts with Ash, Pikachu, and their friends arriving at the ancient city of Cameron Palace, where a festival celebrating the legend of the hero Pokémon Lucario is taking place. During the festival, Ash and Pikachu unknowingly awaken Lucario from his sleep, and they are transported back in time to the time when Sir Aaron and Lucario were still alive.
Lucario was Sir Aaron's loyal Pokémon and helped him maintain peace in the kingdom of Cameron. However, during a battle with a powerful Pokémon, Sir Aaron sacrificed himself to seal the Pokémon's power, leaving Lucario alone and bitter. In the present, Lucario initially resents Ash and his friends, but eventually sees the similarities between Ash and Sir Aaron.
As the festival continues, two mysterious creatures known as the Masked Man and his sidekick, the Iron-Masked Marauder, show up and start capturing Pokémon with their Pokémon-catching machines. It is revealed that the Masked Man is trying to capture the legendary Pokémon Mew to power a machine that can control time and space.
Lucario leads Ash and his friends to the Tree of Beginning, where Mew resides, and they all join forces to stop the Masked Man from capturing Mew. However, in the process, Lucario sacrifices himself to save Ash and the others from falling into a deep chasm.
Mew appears and uses its power to revive Lucario, and they continue to fight alongside Ash and his friends to stop the Masked Man. In the end, Lucario uses his Aura to overload the Masked Man's machine, causing it to explode and sending the Masked Man and his minions flying away. Ash and his friends bid farewell to Lucario as he returns to the afterlife, at peace and reunited with Sir Aaron.
The movie ends with Ash and his friends leaving Cameron Palace, with Lucario's words about the importance of friendship resonating with them as they continue their journey.