In a world where people collect Pokémon to do battle, a boy comes across an intelligent talking Pikachu who seeks to be a detective.
In Ryme City, humans and Pokemon coexist in harmony. Insurance salesman Tim Goodman teams up with Detective Pikachu to solve the disappearance of his father Harry, who was also Pikachu’s partner. Pikachu has no memory of the events leading up to Harry’s disappearance, and only Tim can understand him speaking. Tim teams up with reporter Lucy Stevens and her Psyduck to investigate.
A toxic gas called Serum R is being spread around as a means to make all Pokemon go crazy. It was developed in the same laboratory that was doing experiments on Mewtwo, who Harry was hired to find by Dr. Ann Laurent. After the group finds Mewtwo, he is captured by Roger Clifford, son of Ryme City’s developer Howard. Roger turns out to have been a genetically altered Ditto that belongs to Howard, who wanted to use Mewtwo to fuse his own consciousness into Mewtwo’s body, and in turn use the Serum R to warp Pokemon minds and allow Mewtwo to transfer the humans’ minds to the Pokemon bodies, doing so with parade balloons filled with R. Pikachu fights Howard-Mewtwo and helps Tim sever the link to their minds, and Howard is arrested.
Mewtwo undoes the damage and reveals that he had actually tried to help Harry and Pikachu after they were attacked by Greninja. He fused Harry’s mind to Pikachu’s body to save him. After undoing this, Tim and Harry finally spend time together.
The film starts in a laboratory where Mewtwo (Kotaro Watanabe and Hiro Noshima), the world’s most powerful Pokemon, is being kept for experiments. He awakens and breaks free from his chamber before destroying the whole facility. Mewtwo flies away from the scene and over a road where he appears to fire a blast at a car, sending it off the road.
Just outside of Ryme City, Tim Goodman (Justice Smith) and his friend Jack (Karan Soni) are out in a field where Jack has led Tim to try and catch a Cubone. Tim is not interested in having a Pokemon, but Jack pushes him to try. Tim throws a Pokeball at Cubone, but it bursts back out and tries to attack the guys. After they get away, Tim receives a phone call informing him that his father Harry has been apparently killed in the car crash from earlier.
Tim goes to Ryme City where humans and Pokemon co-exist and work together (Ludicolo are baristas, Machamp are crossing guards, etc). A video he sees explains that the city was established by Howard Clifford (Bill Nighy), who runs his company Clifford Industries with his son Roger (Chris Geere). Later, Tim meets Lt. Hideo Yoshida (Ken Watanabe), who works with a Snubbull. Yoshida knew Harry, but Tim was estranged from his father. He lived with his grandmother after his mother died and he stopped seeing Harry afterwards. It is also revealed that Tim was a former Pokemon trainer, but he gave up and is now an insurance salesman. Yoshida gives Tim a key to Harry’s locker to collect his belongings.
Tim goes to the locker where he is found by Lucy Stevens (Kathryn Newton), a young reporter who works as an unpaid intern for a local news station and has a Psyduck as a companion. Lucy is curious about the circumstances surrounding Harry’s alleged death. Tim then goes upstairs to Harry’s apartment where he finds a note from Harry written specifically for Tim, plus a canister containing a purple gas called Serum R that he accidentally spreads outside, affecting a group of Aipom. He hears a noise and soon meets Detective Pikachu (Ryan Reynolds). He has no memory of how he got to where he is, but he does know Harry since he was his Pokemon partner who was believed to have died with him. Tim can understand him talking while everyone else hears the usual “Pika-Pika”. As they try to figure out what is going on, they are attacked by the Aipom, who have gone crazy. The two get away just before the effects of the gas wear off and the Aipom go back to normal.
Tim and Pikachu go to a cafe where they try and figure out everything involving Harry’s disappearance. Tim suggests that they go talk to Lucy. They find her at an event where she is getting chewed out by Roger. There, Pikachu figures that Tim has a crush on her. Lucy mentions to the two that Harry went to a spot called Ryme Wharf, and they may find answers there.
As the two head to Ryme Wharf, they find a Mr. Mime and try to interrogate him. Mr. Mime just fools around and puts himself in a box, but Tim decides to play along and mime his own interrogation technique. Mr. Mime gives up the location of an illegal underground Pokemon battle. There, Tim meets a trainer named Sebastian (Omar Chaparro) who has a bone to pick with Pikachu since he left a scar on his Charizard after a previous battle. Tim wants to know why Harry was there, but Sebastian will only say if Pikachu wins at a rematch. The little guy is thrown into the ring against the Charizard, only Sebastian uses Serum R on it, making it go wild and try to kill Pikachu. Making things worse is that Pikachu seems to have forgotten how to use his electric powers. Tim has to jump into the arena to intervene. In the chaos, Sebastian accidentally releases all the R into the arena, causing every Pokemon there to lose it. Tim tries to press Sebastian for information, but he only says that he got the gas from someone called “The Doctor”.
Tim goes to talk to Yoshida to suggest that Harry is alive, but Yoshida shows him footage of the car crash through a hologram, saying that nobody could survive it. Tim and Pikachu leave, only to be met by a mysterious woman called Ms. Norman (Suki Waterhouse). She escorts the two to Howard’s home. Tim sees that Howard is handicapped, and that he tried to cure his ailment, but instead chose to create an environment for humans and Pokemon. Howard also shows Tim footage of the crash, but with his advanced technology, he shows sides of the footage he didn’t see before, including images of Harry and Pikachu crawling out of the wrecked car, as well as Mewtwo hovering above them, suggesting that he tried to attack them. Mewtwo is then shown seemingly wiping Pikachu’s memories. As Howard encourages Tim to go look for Harry, he also warns him to watch out for Roger since he seems to have shady intentions.
Tim and Pikachu have a moment where Tim explains his story to Pikachu and his whole relationship with Harry. He regrets not spending time with him after his mother’s death now that he is missing. Pikachu assures Tim that when he finds Harry, he will hug him so hard that his bones will pop.
Tim and Pikachu team up with Lucy and Psyduck to continue their investigation. They find the facility where Mewtwo was being experimented on in a project headed by Dr. Ann Laurent (Rita Ora), who is also responsible for creating the Serum R. The group watches recorded footage from the days of the experiment with Laurent documenting her research on the serum and Mewtwo, right up until he escaped and apparently killed her. One last bit of footage shows that Laurent recruited Harry and Pikachu to find Mewtwo.
The group are then attacked by a team of Greninja, all the way out of the facility. As they run toward the woods, Psyduck uses his power to keep the Greninja away. The earth then starts moving and folding, revealing that they have found the Torterra Islands. However, Pikachu gets hit by a large rock and is injured. Tim spots a Bulbasaur and pleads with him to help heal Pikachu. It returns with other Bulbasaur, who guide the group to their healer – Mewtwo. He revives Pikachu, but Tim asks him what he did to Harry. Before Mewtwo can explain, he is captured by Roger and his team. Pikachu feels that he betrayed Tim and Harry for helping the villains get to Mewtwo and angering him, so he leaves Tim. Tim goes back to Ryme City with Lucy and Psyduck to warn Howard.
Pikachu walks alone by a bridge when he comes across the site of the crash. Through more unseen footage of the crash, he sees that the Greninja caused the car to flip over, and the blast from Mewtwo was done to protect Harry and Pikachu.
When the heroes get to Clifford Industries, they discover that it was Howard’s intention all along to capture Mewtwo. He keeps him locked in a chamber filled with R so that Howard can link his consciousness into Mewtwo’s body. Since Mewtwo has the power to fuse humans and Pokemon while they are all under the influence of R, Howard wants to use this to do it to all of Ryme City’s citizens as a means of evolution. This will be done during a Pokemon Day parade where various balloon floats are filled with R. The parade begins, and the gas is released into the crowds, making all the Pokemon lose their minds. Howard, now in Mewtwo’s body, sets out to fuse everyone with their Pokemon. Lucy, who attempted to get the word out on TV, gets fused with Psyduck, but she finds Pikachu and warns him about what Howard is doing. Meanwhile, Tim finds that “Ms. Norman” is really a genetically altered Ditto that Howard experimented on to replicate humans (but keeping its creepy beady eyes). The Ditto was also disguised as Roger, while the real Roger was trapped in a closet. Tim and Roger work together to stop the Ditto while Tim runs to stop Howard.
Pikachu finds Mewtwo and taps into his powers to unleash lightning powers and destroy the balloon floats, along with the gas. Howard-Mewtwo goes to fight Pikachu, which nearly ends with the villain winning until Pikachu reveals he was just distracting him. Tim then pulls off the device to link Howard’s mind to Mewtwo’s body. Pikachu and Mewtwo fall to the ground, but Mewtwo catches Pikachu.
Howard is arrested, and Mewtwo puts everyone back to normal. Roger finds Lucy and asks her to work with him to do a televised news piece while he tries to undo his father’s corruption. After Mewtwo is done, he thanks Tim for his help, but he says he has one more thing to fix. He reveals that he fused Harry’s consciousness to Pikachu’s body when he was close to death. He undoes this and separates Harry and Pikachu.
Later on, Tim meets with Harry (also Ryan Reynolds) and Pikachu at the train station as he is set to go back to live with his grandmother. The two hug goodbye, but Tim then decides to spend more time with Harry. The three then walk off together.