At the top of the Empire State Building, Zeus meets his brother Poseidon and accuses Poseidon's demigod son, Percy Jackson, of stealing his master lightning bolt. Poseidon reminds Zeus that Percy is unaware of his true identity, but Zeus declares that unless the bolt is returned to Mount Olympus before midnight of the Summer Solstice in two weeks, war will be waged between all the gods.
A 16-year-old Percy struggles with dyslexia and ADHD for long periods. On a school trip to the Metropolitan Museum of Art, Percy is attacked by Alecto, a Fury masquerading as his substitute English teacher Mrs. Dodds, who demands the bolt. Percy's best friend Grover Underwood and his Latin teacher Mr. Brunner help scare off Alecto. Mr. Brunner gives Percy a pen which he claims is a very powerful cosmic weapon, and instructs Grover to take Percy and his mother Sally to Camp Half-Blood — a secret sanctuary for demigod children on Long Island, leaving behind Sally's abusive husband and Percy's stepfather, Gabe Ugliano. There, they are attacked by the Minotaur, who seemingly kills Percy's mother. Percy discovers that Mr. Brunner's pen is a magical sword, and uses it to fight off the Minotaur, killing it with its own horn.
Waking up three days later, Percy learns he is Poseidon's son, Grover is a satyr and Percy's protector, and Mr. Brunner is Chiron, a centaur. He starts coming into his latent demigod powers, which include hydrokinesis and healing, and meets other demigods, including Annabeth Chase, daughter of Athena; and the camp's leader Luke Castellan, son of Hermes. Percy is visited by an apparition of Hades, who reveals that the Minotaur abducted Sally to the Underworld to trade for the bolt. Defying Chiron's orders, Percy sets out for the Underworld with Grover and Annabeth. Luke gives Percy a map with the location of three green pearls belonging to Hades' wife, Persephone, which will allow them to escape the Underworld. Percy is also given a pair of flying winged Converse All-Stars stolen from Hermes, and Luke's favorite shield. Meanwhile, Percy is declared a missing person.
At a garden center in New Jersey, with help from Grover and Annabeth, Percy manages to decapitate Medusa and takes the first pearl from her corpse. At the Parthenon in Nashville, Percy uses the shoes to retrieve the second pearl from the crown of a statue of Athena there, and Grover kills a Hydra with Medusa's head. The trio arrives at the Lotus Hotel and Casino in Las Vegas to obtain the third pearl; however, they forget their mission after eating lotus flowers, the effects from which causes them to lose a sense of time. Percy snaps out of the spell after hearing the voice of Poseidon through telepathy telling him not to eat any more flowers. Percy frees Grover and Annabeth from the flowers' effects; they locate the final pearl in the casino and escape. Unfortunately, they only have one day left to prevent the war, as they were in the casino for almost a week. They discover that the Underworld is in Hollywood and race there. With all three pearls, Percy, Grover, and Annabeth enter the portal to the Underworld upon arriving in Hollywood.
In the Underworld, Hades finds the bolt hidden inside Luke's shield, revealing that Luke was the thief all along. Hades tries to kill the trio, but Persephone turns on him in retaliation for imprisoning her and gives the bolt to Percy. As they only have three pearls, Grover remains behind, while Percy, Annabeth, and Sally teleport to the Empire State Building, the secret entrance to Olympus. However, before they can enter, they are ambushed by Luke, who reveals that he stole the bolt to demolish Olympus and establish the demigods (and himself) as Olympus' new rulers. After a battle across Manhattan, Percy defeats Luke, returns the bolt to Zeus, and reconciles with his father. Having been reunited with Grover, Percy and Annabeth continue to train back at Camp Half-Blood.