The opening sequence starts out with a representative of each different nation, Fire, Water, Earth, and Air Nomads demonstrating their bending powers in front of a red background (much like the original TV show). Katara narrates the history of how the four nations used to live in peace, and how the Avatar maintained peace and harmony through his mastery of all four elements. Then, 100 years ago, the Avatar disappeared and the Fire nation attacked.
Next, a ball of water is pulled from a still pool in an icy and snowy terrain. Katara is carefully bending the water, but she accidentally drops it on her brother who complains that he hates it when she waterbends because he always gets wet. Katara narrates that in their small Southern Water tribe all of the men are off fighting in the war, and food is scarce. Sokka isn't the best hunter. He guides her along some tiger-seal tracks, but they end up nowhere, and he says he did it right, followed the tracks just like his father had taught them, but there's nothing there. But he suddenly spots something shining underneath the ice and pulls out his boomerang and cracks the ice. The ice around them begins to crack quickly, and a giant bubble enclosed in ice rises to the surface. Sokka tries to back away slowly, but Katara grabs his boomerang and cracks open the bubble (much to her brother's protestations). A giant shaft of light shoots into the air, and is seen by a Fire nation ship. Inside the bubble are a boy, and a giant bison. Brother and sister decide to help the boy, who doesn't respond when they ask who he is or where he came from.
Back at the tribe, Katara walks in on the boy (Aang) and notes his many tattoos. She asks where he came from, and he explains that he ran away from home because he was upset. But he's not upset anymore and is ready to go home. He thanks her for rescuing him, and prepares to leave when the Fire nation ship suddenly arrives in their village. A young man with a burn on his face introduces himself as Prince Zuko, and demands that the tribe hand over all their elderly. His soldiers march through the village and drag all the old people out into the center. One soldier walks into the tent where Aang is waiting with some of the other children. He notices Aang's tattoos and hauls him into the center. Zuko takes him onto the ship, and they all leave, while Katara and Sokka stand by, wanting to do something to help, but completely unable to. Katara is upset. She asks what Sokka would have done if it were her that the fire nation dragged off. He responds that she is his responsibility since their father is in the war and their mother is dead; he would have killed every last one of the Fire nation soldiers. Katara convinces Sokka that they need to go and help Aang because he is now there responsibility. Sokka asks how they are going to get him. They hear laughter outside the tent and head out, only to see a bunch of children playing with the sky bison, Appa, who is floating in the air and dangling some of the tribe children.
Meanwhile, on the Fire nation boat, Zuko's uncle, Iroh, is politely describing a test that he needs Aang to take. Once Aang takes the test, he may leave and go free.
Back at the tribe, Katara and Sokka are explaining to their grandmother that they have to leave. Grandma tells them that she knew Katara's destiny would come to this when they found out she was the last waterbender in the tribe. She tells them of her suspicions that Aang is the Avatar. She explains that the Avatar is the one person who can communicate with the spirit world, and he can teach people to feel with their heart (this is why the fire nation fears him so much). She says that it is in the heart that all wars are won. She says they must help Aang on his journey to becoming the Avatar.
Iroh's test consists of placing three objects in front of Aang: a candle, water, and a stone. The candle's flame leans toward Aang and goes out; the water, once poured, gathers itself into a perfect circle; and the rock stands on end. Zuko gets excited and tells Aang that he is now a prisoner, and Aang furiously reminds Iroh that he promised to let him go. Iroh apologizes, saying that he failed to mention that only if he failed the test would he be allowed to go. Turns out Aang is the only person who could pass the test because he is the Avatar. Aang pulls some amazing moves and airbends his way out of the ship. Once there he sees Appa flying along the cliff with Katara and Sokka. He takes off, and he and the others head off to the Southern Air Temple while Zuko laments that he almost had his honor back.
At the Southern Air Temple, Aang excitedly tells Katara and Sokka about all of his friends and teachers and the games they'll play. Katara quickly realizes what is going on, and tries to stop him until she's talked to him. He rushes on, but stumbles onto a pile of skeletons where she finally catches up and explains that the last of the Air Nomads were killed 100 years ago. The Fire Nation knew that the next Avatar would be reincarnated into the Air Nomads (his reincarnations cycle through the four tribes) and that they came and killed them all. Aang doesn't believe her, but finds a skeleton with a necklace on it that he made for his teacher and mentor, Monk Gyatso. Horror struck, Aang yells, and slips into the Avatar state as he builds a giant air bubble around himself. He slips into the spirit world and meets a dragon spirit there who asks, "Where have you been, Avatar?"
Meanwhile, back on with Zuko, one of his father's commanders, Commander Zhao, spots the Zuko's ship. He invites him and his uncle on board to dine with himself and his men. When he stands to give the toast, he instead humiliates Zuko by reminding everyone that Zuko is a banished prince who has lost all his honor and is forbidden to where the Fire nation uniform, as Zuko is doing at the moment. He says they'll let it slide this one time. Zuko warns Zhao that when he is reinstated as the heir to the throne that he will repay this little episode to Zhao. He storms out, and Iroh quickly follows. To blow off some steam, Zuko practices his fighting and firebending skills on some of his men after looking at a small, handheld painting of himself, his father, mother, and sister.
Back with Aang and gang, they have finally reached the Southern Earth kingdom and are packing up camp for the day. Suddenly, a young boy comes running into their circle. A group of Fire nation soldiers runs in and says that they need to arrest the Earth kingdom boy, as he was bending little rocks and hitting them ("It really hurt!"). Katara and Sokka say that no one is going anywhere, and prepare to fight. Katara bends water out of her pouch, does a fancy move and.... accidentally freezes Sokka's arms to his side. As the group is being escorted into the prison, they note all of the people living in huts and the suffering there. When asked how this happened, the father of the boy explains that the Fire nation attacked twice. The Earth kingdom easily defeated them the first time, but then the Fire nation came back with their machines, and they were no match for them then. Everyone was allowed to live peacefully imprisoned. Aang can't believe this happened, and tries to incite them to use the ground around them and stand up and fight. He asks if they would fight if the Avatar was on their side. They say that the Avatar disappeared and is dead. Aang claims he is the Avatar, and air bends to prove he is. Katara and Sokka run to his side as Fire nation guards run to attack. Sokka, after realizing that his only weapon (his boomerang) was taken from him, says, "Everybody can help us now!" and the inmates all attack and defeat the Fire nation guards. The local leader gives Katara a scroll stolen by the Fire nation from one of the Southern Water Tribe's people; it details many different waterbending techniques. The leader also shows him the statue of one of Aang's previous reincarnations, Avatar Kioshi, that came from their tribe. After they leave, Aang admits to Katara and Sokka that he doesn't know how to bend the other elements. He must learn water next, then earth, then fire. They agree to head to the Northern Water Tribe and find a master of water bending. They also plan to help start a change in the war by stopping at all the captive tribes they pass and defeating the Fire nation along the way. They post pictures of Aang and announce that the Avatar has returned. Zuko is never far behind them, noting the damage, and Sokka realizes they are being followed.
Meanwhile, Commander Zhao speaks with Fire Lord Ozai about a set of scrolls that he has obtained that tell the location of the moon and ocean spirits. With this information he and Lord Ozai plan to take down the Northern Water tribe. Ozai asks about his son and the Avatar. He hints that now the race between Zhao and Zuko to find the Avatar is now on.
At that moment, Zuko and Iroh (semi-disguised) are chatting in a colony cafe in the Northern Earth kingdom. Iroh is trying to convince Zuko to give up on the Avatar hunt and find a pretty girl and settle down. Zuko calls over a local boy and asks him what he knows of the Fire Lord's son, Prince Zuko. The boy tells of how Zuko had done something wrong, and spoke out of turn against a general in defense of his friends. Because of this he was challenged to a fire dual (agni kai). When Zuko arrived, he was supposed to fight against his father. He would not do this, and Ozai called on his daughter, Azula, to make fun of Zuko. Then he burned him to teach him a lesson and make him and example to others. Zuko thanks the boy, and says to his uncle that the only way to return his honor is to bring the Avatar to his father. Once he does that, then he will find a pretty girl.
Nearby, Katara is trying to help Aang master waterbending. Aang remembers moments with the monks at the temple, and the water gets especially turbulent, and he loses control. Aang says that while at the Southern Air Temple he met a spirit dragon who helped him. He says that the Northern Air Temple is very close, and asks to go see it. He does, despite Sokka trying to convince his sister to stop him, and Aang meets another monk there. The monk shows him into a room filled with statues of his previous reincarnations. Aang explains that he was given a test to determine if he was the next Avatar: 1000 toys were placed in front of him, and he chose four of them. Turns out he picked the ones that had belonged to the previous Avatar. The monks then explained that he would never be able to have a normal life, or a family (rigors of being Avatar prevented it). At the ceremony where he was to symbolically show his acceptance of becoming the Avatar (everyone bows to him and he is supposed to boy back), he turned tail and ran away. He flew into a storm and crashed into the sea. The monk then apologizes for doing "this," but blames Aang for being poor all his life. He has betrayed Aang and accepts a bag of money as he runs out from a Fire nation soldier. Aang is completely surrounded.
In captivity, Aang manages to slip into the spirit world and talk to the dragon again. The dragon tells Aang of his vision of the moon turning red, and that Zhao has stolen information. He tells Aang to go to the Northern Water Tribe. Zhao then enters, jolting Aang from the spirit world, and asks where Aang has been all this time, how it is that he is so young, and why he didn't use the other elements in fighting his soldiers.
As Zhao prepares a fancy feast and to tell the Fire Lord that he has the Avatar, a masked man (the Blue Spirit) sneaks into the Northern air Temple and manages to set Aang free. Zhao realizes this, and commands his soldiers to stop Aang from escaping. Aang manages to fight his way through using the old training grounds for the Air Nomads. But he turns back and realizes that the Blue Spirit is still fighting and goes back to help him. Zhao runs up and commands his men not to kill the Avatar (he'll just be reborn into another tribe), and the Blue Spirit grabs Aang and threatens to kill him. He drags Aang out of the temple and across a bridge where he is suddenly hit with and arrow Zhao sent after him. Aang takes of the mask and sees that the Blue Spirit is actually Prince Zuko! He conjures up a fog, and disappears with Zuko while Zhao's men try to re-capture him. Zhao heads back to the Fire Lord to give a status report. They decide it is time to wipe out the Northern Water Tribe by killing the moon spirit (he's learned the location through the scrolls he stole). Ozai also warns Zhao to leave Zuko alone (Zhao suspects Zuko of being the Blue Spirit). However, back at Zuko's ship, Iroh tells Zuko that Zhao's men came looking for him (he told them Zuko was on vacation with a pretty girl). In Zuko's bunk, he notices a gas leak next to an open flame. He flees, but a giant hole is blown into the side of his ship.
Aang and gang continue to travel north, and Katara and Aang continue practicing waterbending. They eventually reach the HUGE city of the Northern Water Tribe. The princess and Sokka are immediately attracted to one another and become "good friends". However, the tribe knows that harboring the Avatar brings its risks, and they prepare for war. Sokka volunteers to guard the princess.
In Waterbending class, the teacher tells how water is a flowing element, and that one must allow one's emotions to flow if they are to bend water. Waterbending is also about acceptance. The teacher invites Aang to spar, but Aang again thinks of his monk mentors at the temple and loses control of the water.
Zhao invites Iroh to join the battle at the Northern Water kingdom, claiming that he wants Iroh there because he is a good strategist. He mentions Iroh's failure at the 100-day siege at Ba Sing Se where Iroh lost his son, and says that he won't hold it against him. He offers his condolences to Iroh about the loss of his nephew, Zuko, in that horrible explosion. Iroh leaves, and meets Zuko in the bottom of the ship and relates to Zuko his suspicions that Zhao was behind the attempted murder. He also mentions that Zhao has absolutely no respect for anything sacred.
Meanwhile, Sokka and Princess Yue are having a stroll, and Yue says that she wants to visit the southern tribe some time. Sokka says his grandma will have a lot of questions, like why is Yue's hair white? Yue tells the story of her birth: she didn't breather, and for a few days her parents prayed, then dipped her in the pool of the moon and ocean spirits. Her hair turned white, and she breathed. A part of the moon spirit became a part of her.
Back at waterbending class, Katara and Aang are practicing, when suddenly ash starts falling on the whole city. The Fire Nation has arrived. Iroh is seeing Zuko off, reminding him that his chi will keep him warm. Zuko dives into the icy water and melts his way through the ice into the city. Aang asks to go to a sacred place and meditate so he can communicate with the dragon again. Yue takes him to where the water and moon spirits' pool is, and Aang sits down to meditate. Katara volunteers to stay with him while Yue and Sokka head off to see the fight. Suddenly, Zuko is there in the sacred garden, and he starts a fire and attacks Katara trying to get to Aang.
Out in the city, the Fire Nation is throwing their all into the attack. They send fireballs into the city with their men so the men have a fire source with which to bend fire. Iroh warns Zhao that the water benders will gain more power once the moon rises. Zhao has it taken care of. He heads off to the sacred pool. Meanwhile, Zuko has knocked Katara out and taken Aang. Katara, Yue, and Sokka set out to find Aang.
Aang makes it into the spirit world where he asks the dragon what he should do. The dragon says that the Avatar is not meant to hurt others, and that he needs to use the ocean and demonstrate the power of water. Aang comes out of his meditative state to overhear Zuko's description of his sister, Azula. Back at the battleground, neither party seems to be gaining any ground. Aang and Zuko fight it out (very cool fight sequence), and Katara, Yue, and Sokka find Aang and Zuko. Katara traps Zuko in ice. As they leave, Aang tells Zuko that they could be friends.
Aang and gang head out; Aang heads for the wall, and Yue, Sokka, and Katara follow Zhao and Iroh's group. They end up at the sacred pool where Zhao captures the moon fish. Iroh tries to tell Zhao that killing the moon spirit will disrupt the balance of all things. But Zhao kills it anyway. Iroh, furious, creates fire and bends it, scaring Zhao and his goons away. Yue feels that all is lost, but Iroh explains that not all is lost; she has a part of the moon spirit in her and can restore the balance. Out in the battlefield, the moon turns red, and the water benders are unable to bend. Iroh tells Yue that the moon anointed her, and Yue decides that this is what she was born for. She enters the pool, and her hair suddenly turns black as her life force goes into the moon spirit's form. The moon turns white again, and the tides (no pun intended) quickly turn in favor of the water tribe.
Zhao runs into Zuko on the wall, and Iroh convinces Zuko to walk away from the fight. Zhao tries to attack when their backs are turned, but Iroh proves to be the better bender. He walks away, telling Zhao that his problem is that he stands alone. Four water benders come up on Zhao and attack him. They trap him in a ball of water and he drowns.
Aang finally makes it to the city wall, and there remembers his old mentors and friends. As he does this, his emotions well up in him and he enters the Avatar state and bends a massive wall out of the ocean. The Fire nation is terrified of this, and they make a hasty retreat. Aang wins the battle for the water tribe. The tribe cheers, and Katara and Sokka find a weakened Aang and help him down the stairs. When they reach the bottom, the whole of the water tribe is in the city's center waiting for him. They all bow, and Katara tells Aang that they want him for their Avatar. She does, too. She and Sokka join the crowd and bow to him, and Aang finally bows in return.
Back in fire land, the Fire Lord is recounting the acts of Zhao and Zuko to another person. He explains that in three years a comet will arrive that will tip the scales in favor of the Fire nation. He needs this person to hunt down the Avatar and prevent him from mastering earth and fire bending. He asks, "Will you accept this task, daughter?" Azula replies that she will.
You can send in your spoiler to other movies by going here.