At the beginning of the story, much of the world has been destroyed by the Festum and the remote Japanese island of Tatsumiyajima (竜宮島?, lit. Dragon Palace Island) has only remained unscathed by virtue of an advanced cloaking shield. The island's young people continue with their daily lives unaware of these events, but after many years of peace a lone Festum discovers Tatsumiyajima and attacks. The adults activate Tatsumiyajima's hidden defense systems and attempt to repel the attacker but to no avail. In desperation they order the deployment of the Fafner Mark Elf but its pilot is killed en route to the hangar. Left with no further options, they send a young boy named Kazuki Makabe as the replacement pilot assisted by Soushi Minashiro from within the Siegfried System.
The four pilots all reunite and defeat Idun together. Meanwhile, Tsubaki struggles with her emotions at leaving to synchronize with the island core. Kazuki, with the help of Akane, manages to rescue Soushi, bearing the assimilation. As the Meir begins to make its way to the atmosphere, Maya snipes at it, preventing it from spreading all over the world. Tsubaki has become one with island, as she dissolves into thin air. Idun, barely alive in the Fafner Mark Nicht, hinders Kazuki and Soushi from leaving the battlefield, but Koyo is able to save the two. On their way to the island, Soushi vanishes because of his near assimilated state.
Sui and the other pilots left behind on Tatsumiyajima are going about their individual lives. It appears that the SDP, the phenomenon that occurred during their previous battle to vastly amplify their Fafners' powers, has only influenced them positively.
Narain's party has arrived at the next camp, located in a that lost the majority of its land in battle. They fish in the adjacent sea, replenish their supplies, and indulge in a brief rest. Maya offers flowers to the ocean in memory of Shouko's birthday, and remembers that the next day is Kazuki's birthday, a connection she once thought of as strange. Meanwhile, the top brass at the Neo UN orders the use of something they've been developing in secret to finish Narain's forces once and for all.
Narain's party successfully reaches Tatsumiyajima, but the enemy awaits them there. They struggle as both a huge Festum swarm and the Human Army surround them, but Soushi insists reinforcements are coming. The Fafner unit arriving from the island tries to avoid fighting the Human Army and uphold Fumihiko's wish to not fight with other humans, but the Argos platoon pursues them with orders to capture an island Fafner.
The high-speed crafts are heading toward Tatsumiyajima to report what has happened to Narain's party. One of them carries the staff injured in the battle. Meanwhile at Tatsumiyajima, Canon battles with her own SDP, and talk of a "Second Plan L" begins to be heard.
The Neo UN agrees to the terms proposed by the top brass of Alvis for the return of the latter's prisoners of war. At the same time, Hester Gallop is informed that the new Fafner under development by the Neo UN is in experimental stages. Memories from her youth, when she first established the Neo UN, flash through Hester's mind; she has her own convictions and things she wishes to protect. However, certain personnel within the Neo UN have contacted Tatsumiyajima with plans of their own...
Sein and Nicht rush to destroy the Azazel-type attacking the World Tree. Kazuki shows the boundless power of Sein with its limiters removed, and Soushi expertly manipulates the "uncontrollable" Nicht. Their overwhelming power stirs excitement in the Human Army soldiers as well as the Tatsumiyajima pilots.
Narain's party has almost reached the base when they suffer a surprise attack and struggle to evacuate. Mitsuhiro realizes what has happened and orders the Fafners to retreat while, at brigade control, Emery says a prayer in hopes that the enemy will receive her message... but their enemy launches into an even crueler strategy.
An unknown phenomenon has surfaced in all the pilots from the island. It's clearly an effect of the Fafners' new core, but the Alvis medical team has no idea if it threatens their lives or not, much less how to treat it. Though, Orihime seems to know something about this...
The preparation of the bone festival is underway. Canon and Sakura make amends for what happened during the recent alien invasion. It is seen that Koyo, in his assimilated state, is released by Tsubaki after Chizuru had froze him in the capsule. The islanders enjoy the evening at the bone festival. The following day, the pilots realize that Koyo has left the base. They barricade him in a shrine to protect him. Soushi spars with Kazuki, while Kyouhei prepares to snipe Koyo. When Canon arrives, Koyo is reminded of Shoko from her clothing, as he is brought back to normal from his assimilated state.
As Canon continues to fight alone in Dreizehn, for just a moment, she glimpses a faint hope for the future. Her mother can only watch from outside, unaware of her daughter's battle to grasp that hope. Meanwhile, Sui's father discovers the link between Sui's SDP and the good luck charm that his sister had left behind.
The escape plan is in motion, but quickly faces a crisis. The fangs of the giant Festum that holds Alvis in its clutches sink in deeper and deeper, and Welle Shield 1 is destroyed, with Welle Shield 2 in imminent danger. Orihime endures the pain silently, but as he watches her, Fumihiko secretly makes the decision to enact the next plan. Meanwhile, Kenji and Sui witness something that shouldn't be possible...
Kazuki pilots the Fafner and defeats the enemy. But the children on the island, previously oblivious, must now face the horrible reality of their situation.