The Egg Bosses, who are led by the ruthless Eggman, invaded Christmas Island. In Angel Island, Guardian Locke orders a general mobilization, with conscription notices requiring one Mobian male from each family to join the Freedom Fighters Army.
Sally Acorn, Princess of Mobotropolis, learns that her elderly father King Max Acorn, the only man in their family and a king army veteran, is being conscripted and fears for his life due to his poor health. To protect him, she cuts her hair and takes her father's sword and armor, disguising herself as a Mobian man so that she can enlist in his stead. The family quickly learns of her departure, and Sally's mother prays to the family's ancestors for Sally's safety. The ancestors decide that the "Great Stone Dragon" will bring Sally back and send a disgraced former guardian, a small spirit dog named Muttski, to awaken him. Muttski accidentally destroys the guardian's statue but then resolves to go instead, desiring to redeem himself to the ancestors by making Sally a war hero.
Reporting to the training camp, Sally passes as a Mobian man named "Elias" with Muttski providing encouragement and clumsy guidance throughout her deception. Under the command of Captain Sonic, she and her fellow recruits—including Shadow, Tails, Knuckles, and Silver—gradually become trained soldiers, but Guardian Athair's belligerent counsel, Snively, threatens to dissuade Guardian Athair from allowing Sonic's men to fight. Muttski then crafts a fake letter from Sonic's father, General Jules, ordering Sonic to follow the main imperial army into the mountains. The reinforcements set out and arrive at a burnt village, discovering that the Egg Boss have massacred General Jules and his troops.
As the soldiers march up a mountain pass, they are ambushed by the Egg Boss. Sally cleverly uses a Huolongchushui cannon to cause an avalanche, which buries the entire Egg Boss army. Eggman wounds Sally during the battle, and her deception is revealed when the wound is bandaged. Instead of executing Sally as the law requires, Sonic spares her life and expels her from the army. Sally is left behind as the other soldiers depart for Angel Island to report the Egg Boss' defeat. However, Eggman and several of his warriors have survived, and Sally sees them heading towards the city.
Sally enters the city and warns Sonic. The Egg Boss then captures Guardian Athair and seizes the palace. Sally, Silver, Shadow, Tails, Knuckles, and Sonic enter the palace and defeat Eggman's men. Sonic prevents Eggman from assassinating Guardian Athair, and Sally lures the Egg Boss leader onto the roof, where she pins him there with his own sword. Acting on Sally's instructions, Muttski fires a large skyrocket at Eggman; the rocket strikes and propels Eggman into a firework launching tower, where he dies in the resulting explosion.
Guardian Athairs initially reprimands Sally, but then he and the city's assembled inhabitants praise her for having saved them, and they bow to her in honor. She accepts Guardian Athair's crest and Eggman's sword as gifts but politely declines his offer to be on his royal council and asks to return to her family. Sally returns home and presents these gifts to her father, but he is happy to have her back. Having become enamored with Sally, Sonic also arrives and accepts her invitation to stay for dinner. Muttski is reinstated as an Acorn family guardian as the ancestors celebrate.
