The film opens with an underwater scene filled with creatures great and small. Jellyfish drift across the screen along with octopi and large whale-like fish as the viewer is taken deeper into the sea. We soon encounter Fujimoto, Ponyo’s father, who is busy doing scientific tasks on the deck of his submarine-like ship. Fujimoto is responsible for maintaining the balance between land and sea and although he was once human, he is now distrustful of mankind because of the pollution in the ocean.
While Fujimoto works, a small head emerges from a porthole. This is Ponyo in tadpole form a tadpole in a red dress with a human head. She is curious about the world outside her father’s ship and she is followed by hundreds of smaller versions of herself her little siblings. One of her siblings gives her a kiss and Ponyo sets out for the world by hiding under a little jellyfish that is clinging to a big one. She drifts along until she arrives at a small coastal harbor. She finds herself caught in a trolling net and squished into a small glass jar. She manages to escape the net, but not the jar, and floats unconscious to the edge of a large cliff.
Sosuke, a 5-year old boy, lives with his mother Lisa (Risa in the Japanese version) in a house at the top of a cliff. Sosuke is coming down the cliff to play in the ocean with his boat and he finds Ponyo stuck in the glass jar. He frees her by smashing the glass with a rock and saves her life by placing her in a green plastic bucket full of water. His mother calls down to him that it is time to leave, so Sosuke takes the bucket with him to school. As they get in the car to leave, Fujimoto emerges from the sea in search of Ponyo; he is unable to stop Lisa and Sosuke, however, because Lisa believes that Fujimoto is a “freskshow.” Sosuke’s school is right next to a senior center where his mother works, and we meet several of the feisty senior women. Most are interested in Ponyo, but one cranky lady insists that Sosuke release her back to the ocean because Ponyo has a “human face.” Sosuke tries to hide Ponyo from his teacher and classmates, but Ponyo squirts several people with water and Sosuke is forced to hide near the water’s edge. Fujimoto takes advantage of this situation and sends waves to bring Ponyo back to the sea. Just before she is swept away, Ponyo says that she loves Sosuke and Sosuke promises to love and care for her. When Sosuke realizes that Ponyo is gone, he clings to the green bucket and cries.
That evening, Sosuke’s father calls home from his fishing boat and says that he won’t be home on time. Lisa is extremely annoyed, but Sosuke signals his father’s boat from their house and wishes him luck. Meanwhile, Ponyo is unhappy to be back underwater. Instead of her fish food, she tells Fujimoto that she wants to eat ham (Sosuke gave her some while she was in the bucket). Fujimoto explains that Ponyo cannot be human because this would cause an unbalance between land and sea and thus precipitate the destruction of the world. Ponyo, however, insists on finding Sosuke and uses her burgeoning magic powers to grow hands and feet that look like chicken appendages. Fujimoto uses his powers to subdue his daughter and places her in a small bubble. He remarks that Ponyo’s magic is already very strong and that he will need her mother’s help to control her. Once Fujimoto leaves the room, Ponyo’s siblings chew the bubble until it bursts, freeing her. Ponyo grows her arms and legs again and breaks through the ship’s windows. With the help of her siblings, who have turned into large waves in the shape of fish, Ponyo rises to the surface and runs along the waves in search of Sosuke.
Ponyo’s attempts to find Sosuke have created a tsunami that floods the harbor town and her desire to be human has created instability on land and at sea. The moon is drawn closer to the earth, satellites come crashing down, and Sosuke’s father’s fishing boat is caught amidst the giant fish waves. Ponyo finds Sosuke and Lisa driving home in the storm and jumps into the road. Lisa is startled to find a little girl out in the storm, and Sosuke, although it takes him a minute, recognizes his friend Ponyo. Lisa scoops up the children and carries them inside where she makes tea and ramen noodles. Ponyo has to learn to sit and eat properly. While everyone is eating, Lisa looks across the bay to the senior center and sees a light. She realizes that the seniors have not been evacuated and decides to risk crossing the mountain road to help them. She makes a bunch of food for the children and leaves Sosuke in charge. Ponyo has fallen asleep, and while she sleeps the storm subsides. Fujimoto peers through the window at his daughter and is shocked to see that she is becoming human. He calls upon Ponyo’s mother, the sea goddess Gran Mamare, to help him control their daughter. Gran Mamare arrives on a wave of golden fish and calms her husband; she suggests that they test the boy’s love for Ponyo. If Sosuke’s love is pure, Ponyo can become completely human and the natural balance will be restored. If not, Ponyo will become sea foam. Fujimoto is horrified at the thought of his daughter becoming foam, but Gran Mamare reassures him that all sea creatures are born of it and will return to it.
Ponyo and Sosuke wake up and realize that Lisa is still gone. Together, they set out after her in Sosuke’s toy boat that Ponyo has used her magic to make bigger. While following the submerged mountain road, Ponyo and Sosuke meet other people from town. Everyone is safe and headed to high ground minus the seniors and the senior center staff. Ponyo and Sosuke press on, and Ponyo falls asleep just as they reach dry land. As she sleeps, the boat shrinks again. Sosuke wakes her up and they head out hand in hand towards the center. Ponyo is very sleepy and, in her exhaustion, begins to revert back to her tadpole form. Sosuke quickly scoops her up into the green bucket and fills it with water only to encounter Fujimoto emerging from the sea. He asks that Sosuke and Ponyo follow him underwater, but Sosuke distrusts and runs from him towards a small island. On this island is also the one cranky senior lady. Fujimoto sends ocean waves after Sosuke and sweeps the three of them underwater into a giant jelly fish bubble.
Inside the bubble, Fujimoto has sheltered Lisa and the other seniors whose health and mobility has been restored. Gran Mamare is also present. Sosuke approaches Gran Mamare with Ponyo in his little bucket. Gran Mamare asks Sosuke if he can love Ponyo even though she is really a fish. Sosuke is adamant that he does love Ponyo. Gran Mamare then asks Ponyo if she is willing to give up magic to become human. Ponyo agrees and Gran Mamare places her in a small bubble that she gives to Sosuke. She tells Sosuke to kiss the bubble when he returns to land and Ponyo will become a little girl again. Gran Mamare declares that balance has been restored and that “life begins anew” and Lisa promises to care for Ponyo. All the humans are returned to land by Fujimoto who shakes Sosuke’s hand goodbye in a display of new respect for humans.