In Muromachi Japan, an Emishi village is attacked by a demon. The last Emishi prince, Ashitaka, kills it before it reaches the village, but its corruption curses his arm in the battle, giving him superhuman fighting skills, but is fatal. The villagers discover that the demon was once a boar god, Nago, corrupted by an iron ball lodged in his body. The village’s wise woman tells Ashitaka that he may find a cure in the western lands Nago came from.
Heading west, Ashitaka meets Jiko-bō, a wandering monk, who tells Ashitaka he may find help from the Great Forest Spirit, a Kirin-like creature by day and a giant “nightwalker” by night. Nearby, men herd oxen to Irontown, led by Lady Eboshi, when they are attacked by a wolf pack led by the wolf goddess Moro. Riding one of the wolves is San, a human girl. Later, Ashitaka discovers two injured Irontown men, and sees San and her wolf pack; he greets them, but they leave. He carries the injured men through the forest, where he encounters many kodama, and glimpses the Forest Spirit.
In Irontown, Ashitaka learns Eboshi has built the town by clear-cutting forests to claim ironsand and produce iron, leading to conflict with the forest gods. The town is a refuge for social outcasts, including former brothel workers and lepers, whom Eboshi employs to manufacture firearms to defend against the gods; Nago was turned into a demon by one of Eboshi’s guns. Eboshi also explains that San, self-dubbed Princess Mononoke, was raised by the wolves as one of their own and resents humankind.
San infiltrates Irontown to kill Eboshi, but Ashitaka intervenes, knocking them both unconscious. As he leaves, he is fatally shot by a villager, but he continues to carry San, sustained by the curse but collapses. San awakens and almost kills the dying Ashitaka, but hesitates when he tells her that she is beautiful. She takes him to the forest, and decides to trust him after the Forest Spirit saves his life.
A boar clan led by the blind boar god Okkoto attacks Irontown to save the forest. Eboshi prepares for battle and sets out to kill the Forest Spirit under Jiko-bō’s supervision, who is working for the government. Eboshi intends to give the god’s head to the Emperor of Japan in return for protection from local daimyo; according to legend, the Forest Spirit’s head grants immortality.
In battle, the boar clan is annihilated and Okkoto is corrupted by gunshot wounds. Jiko-bō’s men disguise themselves in boar skins and trick the rampaging Okkoto into leading them to the Forest Spirit. San tries to stop Okkoto, but is swept up in his demonic corruption. Moro intervenes and Ashitaka dives into the corruption to save San. However, Ashitaka’s infection is accelerated, and San is also cursed by the corruption.
The Forest Spirit kills Okkoto and Moro, and during its nightwalker transformation, Eboshi decapitates it. It bleeds ooze that instantly kills life as it searches for its head, which Jiko-bō has stolen. The forest begins dying as kodama die, and Moro uses her last moment to bite off Eboshi’s right arm. After bandaging her and convincing San to help him retrieve the head, Ashitaka and San follow Jiko-bō to Irontown, where they manage to return the Spirit’s head. Restored, the Forest Spirit returns and heals the land, and cures Ashitaka and San of the curse.
Though close, San decides to stay in the forest; Ashitaka will help rebuild Irontown, but tells San he will visit her. Eboshi vows to build a better town, as the forest begins to grow.