In 1996, Miki Saegusa of the United Nations Godzilla Countermeasures Center (UNGCC) travels to Baas Island to monitor Godzilla and Little Godzilla following the defeat of SpaceGodzilla,[b] only to find the entire island destroyed and both monsters missing as the island was ingulfed in an explosion of nuclear fission. Godzilla, now covered in lava-like rashes, subsequently appears in Hong Kong and destroys great swathes of the city with an empowered version of its atomic breath. The JSDF hires college student Kenkichi Yamane to unravel the mystery of Godzilla's condition. Yamane, a grandson of the same Dr. Kyohei Yamane who had encountered the first Godzilla, suspects that Godzilla's heart, which acts as a nuclear reactor, is undergoing a nuclear meltdown as a result of the monster absorbing the energy released from a volcanically triggered uranium deposit on Baas Island. Yamane theorizes that when Godzilla's temperature reaches 1,200 °C (2,190 °F), it will explode with enough energy to melt the Earth down to its core.

The JSDF deploys the Super X III, an aerial combat vehicle outfitted with ultra-low temperature lasers, in an attempt to reverse Godzilla's self-destruction. While Godzilla's meltdown is not stopped, it is halted long enough to render Godzilla unconscious temporarily. Meanwhile, a colony of Precambrian organisms mutated by the Oxygen Destroyer used to defeat the original Godzilla are awoken during the construction of the Tokyo Bay Aqua Line. The creatures combine into several man-sized crab-like creatures and engage the JSDF in several deadly skirmishes. The creatures, dubbed "Destoroyah," are revealed to be vulnerable to subzero temperatures and are temporarily held at bay with low-temperature lasers. The creatures respond to the threat by merging into a larger 'Aggregate' form, which destroys the lasers and takes to the skies in its Flying form.

Godzilla awakens, its condition, having worsened to the point that its meltdown could potentially destroy the planet through a China syndrome-like incident. Miki locates Little Godzilla - renamed Godzilla Junior on account of its increased size - and telepathically lures it to Tokyo, hoping that Godzilla will follow and be killed by Destoroyah. Junior arrives and battles Destoroyah's Aggregate form, who absorbs its DNA before being seemingly defeated. Godzilla arrives at Haneda Airport and reunites with Godzilla Junior, only for Destoroyah, bolstered by Junior's DNA, to reappear in its final, 'perfect' form. Destoroyah kills Junior by dropping Junior onto the Ariake Coliseum and blasting it with its Micro-Oxygen beam. Godzilla manages to drive off its adversary and unsuccessfully attempts to revive Junior.

Godzilla's bereavement accelerates its meltdown, which a second attack by Destoroyah further worsens. In the ensuing battle, Godzilla's meltdown reaches a critical state, granting it access to an even further empowered heat ray, which it uses to critically wound Destoroyah. Destoroyah tries to retreat, but the JSDF fires its low-temperature lasers at its wings, causing it to plummet onto the superheated ground and dissipate.

Following the defeat of Destoroyah, Godzilla goes into meltdown, but the JSDF is able to minimize the damage with its freezer weapons. While successful in preventing Earth's destruction, Godzilla slowly and painfully melts to his death, which renders Tokyo uninhabitable. Suddenly, the radiation in Tokyo abruptly decreases to background levels. Godzilla Junior's lifeless body had absorbed the senior Godzilla's radiation, resurrecting it as the new King of the Monsters and the new Godzilla.