At a museum in Boston, Rugal Bernstein steals three relics: The Kagura Mirror, the Yagami Necklace and the Kusanagi Sword. He uses them to disappear into a dimensional portal to awaken the mythical entity known as the Orochi, which would grant him limitless powers. However, the sword is revealed to be a fake - thus, Rugal's quest is delayed. Mai Shiranui is told by an injured Chizuru Kagura that the whereabouts of the real sword are with Saisyu Kusanagi, who is housed at a mental institution. She is also warned that she alone must defeat Rugal and her boyfriend Iori Yagami should not be involved. At the institution, Mai meets a catatonic Saisyu and his son Kyo, but Iori's presence suddenly breaks Saisyu's catatonic state, and the elder Kusanagi threatens to kill Iori before losing consciousness and dying. Meanwhile, at another hospital where Chizuru is recovering from her injury, she is informed by her colleague Scott that Rugal has altered the King of Fighters database and issued challenges to all fighters around the world. CIA agent Terry Bogard enters Chizuru's room, demanding for information on Rugal's whereabouts and the tournament. She tells him of the different dimensions that exist, but he does not believe a word. Chizuru then tells Terry to go to Seattle and ask Mai, who is actually an undercover operative sent by the CIA to infiltrate Chizuru's organization a year ago. At a cemetery in Seattle, where Saisyu is buried, Kyo and Iori confront each other once again. Iori explains that both Kusanagi and Yagami clans were destined to be enemies. Mai hitches a ride with Kyo to his home, where she explains to him that she is looking for the Kusanagi Sword. Kyo tells her that centuries ago, according to family folklore, a Yagami ancestor attempted to release the Orochi, but it consumed him with murderous rage. Kyo's ancestor killed the Yagami and returned the Orochi into its world. Mai tells Kyo that Rugal is out to unleash the Orochi once again. Kyo, meanwhile, wants to confront Rugal, who destroyed his father's mental state. At a hotel, Mai and Kyo meet up with Iori and Terry. It is revealed that Rugal is using the tournament dimension to merge it with the real world. After Mai blows her cover in front of Kyo, Iori puts on his Bluetooth headset and enters the tournament dimension to confront Rugal. There, he defeats Rugal's servants Mature and Vice in combat, only to have his mind consumed by the Orochi. The next day, Kyo is lured into the tournament dimension, where he first fights Rugal and loses, but is allowed to live as a warning. This prompts him to bring out his ancestral sword and join Chizuru and Terry into the tournament after Mai is dragged in by Rugal. When the four meet up, they are separated into different dimensions, with Kyo fighting Rugal and Mai and Terry facing Mature and Vice. In the middle of a sword fight, Rugal is about to decapitate Kyo when Iori suddenly appears and intervenes. Here, Rugal reveals to Kyo that several years back, he battled Saisyu, Chizuru and Iori over control of the Orochi. During that fight, Iori allowed the Orochi to take over his body, defeating Rugal, but also destroying Saisyu's mental state by bashing his head against a wooden barrier several times. This leads to a fight between Kyo and Iori. Kyo slashes Iori in the back, releasing the Orochi from his body. Disappointed by the outcome of the fight, Rugal sends Kyo, Iori and Mai into another dimension to face them with his full potential. Chizuru and her multiple clones appear, revealing that she has found the mirror and the necklace. The heroes fail in their first attempt to combine the relics and trap Rugal, with Chizuru mortally wounded. Mai takes her place as the mirror holder, but as she, Kyo and Iori corner Rugal, they are once again overcome by his powers. Rugal destroys Kyo's sword, but as he is about to finish him off with a fireball, Kyo magically generates a new sword to block it. He then throws the sword and destroys Rugal. Back in the real world, Scott places a lantern on the ocean in memory of Chizuru. Kyo decides to keep the family tradition by continuing with the tournament. He reflects on his late father's teachings while Iori stares at him from the other side of the pier.

Telly Paretta (Julianne Moore) believes that her son, Sam (Christopher Kovaleski), died fourteen months ago in a plane crash, but her husband Jim (Anthony Edwards) tells her that she's delusional and that they have never had a son and even her best friend Eliot (Jessica Hecht) doesn't appear to believe in Sam's existence despite her closeness to him. Dr. Munce (Gary Sinise) tells her that Sam was merely a figment of her imagination and is just imagining a life that might have been. He recommends that she be sent to a hospital, but she runs away and meets with a man named Ash (Dominic West) who she thinks is the father of a girl (Kathryn Faughnan) who was friends with her son and died in the same crash. At first he dismisses her, claiming he never had a daughter, and calls the police. After she is taken into custody, however, he remembers his daughter and rescues Telly. Together they escape and go into hiding, pursued by National Security agents. Telly and Ash capture an agent (Lee Tergesen), whom they threaten. The agent reluctantly reveals that he and other agents are merely helping "them" and that they do so to protect humankind. The roof of the house blows off and the agent, along with the roof, is sucked into the sky — presumably taken by "them"- and Telly and Ash flee. Eventually, Telly visits Dr. Munce again and he reveals that the disappearances are the work of "them," and that the government monitors their trials, all too aware that they have no power to stop "them" from doing whatever they want. Doctor Munce takes Telly to an airport and the dilapidated hangar of Quest Airlines, where he introduces her to an agent of “them” (Linus Roache). He tells the agent that “It’s over,” and to stop the experiment because it will only cause more harm. The agent replies, saying “It’s not over,” and then tells Telly that she has been a part of an experiment to test whether the bonds between mother and child can be diminished. In her case, her memories could not be erased. Telly refuses to deny her son's existence. The agent mentions that if he fails to erase her memory then he will look like a failure. The agent then subdues her and finally succeeds in erasing her memories of her son. During further questioning, though, a question about the name of her son triggers Telly's memory of her pregnancy, and all of her memories of Sam return. This causes the agent to be "abducted" himself, supposedly for his failure to erase her memory. This ends the experiment. Telly finds herself living a normal life, although she remembers everything that has happened. She reunites with Sam at a park. Also at the park is Ash, watching over his daughter. Like Sam, he has no memory of what has happened. Telly reintroduces herself, and the two sit and watch the kids play in the playground.