Yumi and Kyo are children who have been selected to take part in a top secret mission, to be the pilots of the first Fafner combat units; the last chance of survival for the human race. The enemy is ruthless, remorseless and is able to read the minds of humans. Therefore, the details of this mission are kept a secret even from the personnel involved. The young pilots must use all their courage and faith in order to survive and complete their mission or the fate of mankind would be compromised.

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The year is 2148. Two years after the end of the original Fafner in the Azure TV series, Tatsumiya Island and its surviving residents have returned to some semblance of recovery. However, things have become desperate for our hero, Kazuki; nearly blind now, and partially crippled from his battles with the Festum two years earlier, he clings to the promise his fallen friend Soushi made to him to return to the island and set things right again. Kazuki's hopes flare when a lifeform is detected within an unmanned submarine that comes floating into Tatsumiya Bay one night, but the person aboard isn't Soushi; it is a mysterious "boy" named Misao Kurusu who may not be entirely human, and who claims to have been sent by Sōshi. With Misao's arrival, hostilities break out anew between the Human Army and the Festum, and the Fafner pilots are thrown into the most desperate battle of their lives - this time, with the fate of TWO races riding on their shoulders.

Kazuki, Maya, Kenji, and Canon, all accompanied by Kyouhei, charge straight towards the entrance of the core in order to rescue Soushi, who is revealed to be inside the core. During the operation, Tsubaki is experiencing the death process to complete the learning process for the Festums to understand life and death. Moreover, she will need to return to the core to complete this process. Kenji maps out a plan of attack, Canon confirms the battle formations, and Maya reminds that all pilots will return back to the island alive. Soushi is being controlled by Idun, who uses the Siegfried System to exploit the weaknesses of the pilots, that being to break their battle formation.

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.