The film takes place two years after the events of Fullmetal Alchemist, in which Edward Elric recovered his arm and leg and his brother Alphonse's body. However, he was dragged from his homeworld through the Gate of Alchemy—the source of all alchemical energy—to a parallel world of Earth in 1923, which is fundamentally governed by the laws of modern science instead of alchemy. When it occurred, he was stripped of his alchemical powers and his newly restored arm and leg.

In this parallel world, Edward researches rocketry in Munich, Germany with his friend Alfons Heiderich, a young man who resembles Alphonse, in the hopes of returning to his world. Edward rescues a troubled, persecuted Romani woman named Noah from being sold. Noah is taken in by Edward to live with him and Alfons, and begins having visions concerning Edward's life in his world. The next day, Edward meets Fritz Lang, a Jewish film director resembling King Bradley, who persuades Edward into helping him hunt down a dragon he has been seeking for inspiration for his next film. The dragon, which turns out to be homunculus Envy, attacks Edward until he is weakened and captured by members of the Thule Society.

The Thule Society, led by Karl Haushofer and Dietlinde Eckhart, use Envy and Edward's kidnapped father Hohenheim as catalysts to open a portal to Edward's world, believing it to be the utopia Shamballa after learning about it from Hohenheim. A number of armoured soldiers are sent through the portal, only to emerge on the other side in the city of Liore as mutated zombie-like creatures. Alphonse, who had come to visit Liore, fights off the armoured soldiers and merges a part of his soul to one of their suits to aid him in combat. Meanwhile, Edward breaks into the Thule Society headquarters and accidentally reopens the portal, returning the dead armoured soldiers to Earth and allowing Alphonse's armoured form to briefly reunite with his brother before his soul returns to his body, increasing Edward's determination to return to his world.

Alphonse is guided by the homunculus Wrath to the underground city beneath Amestris's Central City to reopen the Gate of Alchemy. There they are attacked by the homunculus Gluttony, who fights and mortally wounds Wrath. At Wrath's insistence, Alphonse transmutes and sacrifices the two homunculi to use as material to open the Gate. Meanwhile, in Munich, the Thule Society persuades Noah into guiding them on how to correctly open the Gate based on what she had learned from reading Edward's mind. Edward learns from Lang that the Thule Society plans to use the weapons from his world to help Adolf Hitler in his attempt to start a revolution, and heads to stop them. Hohenheim and Envy are both transmuted at the same time that Alphonse transmutes Gluttony and Wrath. With the Gate opened, Eckhart leads a fleet into the other world, where she gains the ability to use alchemy. However, she begins to go mad with power and fear of her new surroundings and launches an attack on Central City. Alfons launches Edward in a rocket-powered plane to return him to his world before being gunned down.

Edward appears in his world and is reunited with Alphonse and his friend Winry Rockbell, who fits Edward with new automail limbs. The Amestris military manages to stop most of Eckhart's soldiers with the help of Roy Mustang. Edward battles Eckhart before Alphonse transmutes parts of his soul to a group of armours, which attack her and force her to retreat. Upon reappearing in her own world, Eckhart is covered with shadow creatures from the Gate and killed by an officer out of alarm of her new, monstrous appearance. Understanding the danger posed by the connection between the two worlds, Edward returns to Earth to seal the Gate on that side, knowing he will be trapped on Earth forever. Instead of sealing the Gate on the other world's side as per Edward's request, however, Alphonse has Mustang seal the Gate and follows Edward to remain with his brother. Following Alfons' funeral, the Elric brothers leave Munich with Noah, intending to destroy the weapons meant to be used in Hitler's attack and enjoy their new lives together on Earth.?

The movie begins with a young girl, Julia Crichton, waking up from a dream about the day her family was forcibly taken from her home by soldiers beside her older brother Ashleigh , who is currently studying their parents' alchemy books. Ashleigh then shows his sister some pages and explains that with the alchemy in the book, he hopes to make a world that no one's seen before. Soon after discovering two strange rubbed-out pages, the siblings hear some strange noises and Ashleigh goes ahead to investigate, but a worried Julia follows to a room where she finds the bodies of her parents hung up and dripping blood. She watches in horror as her brother is attacked and presumably murdered to which she faints.

Years later, a criminal breaks free from prison in Amestris, and the Elric brothers, Edward and Alphonse, join the effort to recapture him. The duo confronts the escapee who proves himself a dangerous opponent able to create ice and lightning from the alchemy circles drawn in blood on the palms of his hands. Despite the Elrics' efforts to capture the criminal, he ends up escaping, and after some investigation with Edward's superior Roy Mustang and his lieutenant Riza Hawkeye, they learn that the fugitive, Melvin Voyager, escaped with only six months remaining of his five-year sentence. Among his belongings, they find a newspaper page with a piece cut off, and comparing with an intact copy of the same page, they find that the missing piece is a photo of a young woman named Julia Crichton who was arrested while entering illegally in the remote Table City, set in the border between Amestris and Creta.

Intrigued by the alchemy used by the criminal and his connection with Julia, the Elrics board a train to Table City to investigate further, but the train is attacked by an unknown individual who transforms into a wolf-chimera and takes control of the locomotive. While trying to retake the train's control from the Wolf-Chimera, flying soldiers called the Black Bats attack the train, attempting to rescue what they think are ordinary citizens, but they fall back after finding out the prisoners were Amestrians posing as prisoners as a trap. Meanwhile, Melvin finds his opportunity and escapes, followed after by the Elric Brothers. Ed and Al arrive at a prison, where Melvin destroyed the prison walls to find Julia. Melvin attempts to retrieve Julia, but is interrupted by Miranda, the leader of the Black Bats, who tries to rescue Julia as well. Ed then challenges Melvin while Alphonse goes to save Julia. She and he fall into a village in a vast chasm (The Valley) that surrounds Table City, where Melvin follows and reveals his true identity as Julia's brother, Ashleigh Crichton. Ed then ventures down to The Valley in search of Alphonse, where he learns that Table City was originally the Hill of Milos, until Creta and later Amestris invaded the city and occupied it, forcing the Milosians to live in The Valley, in poverty.

Inside the Black Bats' secret base, Julia and Alphonse develop a friendship while Julia learns about Al and Ed's tragic past of human transmutation. Later, when Ed meets up with Al in the Black Bats base, they find themselves hunted down by wolf chimeras from the Cretan secret police dispatched by Colonel Herschel, the Cretan commander of the area, prompting them to retreat further. They and the Elrics arrive in a room with maps and locations of Table City, where Miranda explains to the Elrics their mission: to reclaim Milos by using the Sanguine Star to control a powerful heat source called Magma. Miranda also explains that the Sanguine Star was a 'red glowing stone of power'. Shocked by the description, the Elrics reveal that the Star might be a Philosopher's Stone, which requires human sacrifice to create. Though shocked at the revelation, Julia is determined to do anything to secure the Milosians' freedom, and Ashleigh agrees to help her.

Wanting to avoid a bloody war, Ed and Al return to Table City in an attempt to find the Star and destroy it. Later that night, the Black Bats begin their assault on Table City. Miranda, Ashley, and Julia then venture to the main tower, where, suddenly, Ashleigh fatally injures Miranda and explains to Julia that the use of Miranda's blood activates a three dimensional transmutation circle drawn in blood to create the Sanguine Star. Julia then realizes that he is an impostor, Security Chief Atlas, who was enveloped by alchemy's potential of creation and power and killed Julia's parents for it. He explains that he tore off the real Ashleigh's face and the skin from his lower left side to deceive Julia and create the Star. Ed and Al arrive to rescue Julia and confront Atlas, who escapes to the location of the Star. As Ed, Al, and Julia chase after Atlas, Herschel detonates a Cretan thermal power plant, pouring out a massive amount of lava towards the Valley. Al goes to help save the valley while Ed and Julia go after Atlas. Atlas nearly attempts to retrieve the Star, only to be confronted by Ed and Julia. Julia retrieves the star and decides to save the Valley by swallowing it to use its power.

Meanwhile, Alphonse's attempt to stop the lava are futile until Julia arrives to help him stop the lava. Atlas arrives to take back the Star, only to be confronted by Colonel Herschel, who reveals himself to be the real Ashleigh Crichton. He survived by swallowing a Star and using its power to heal his wounds. Ashleigh then kills Atlas in revenge for the death of his parents. Confirming his identity to Julia while apologizing for leaving her alone for so long to keep her safe from Atlas, Ashleigh tells Julia to come with him to Creta so they can make a world that no one had ever seen before. Julia refuses and decides to fight her brother, with Ed and Mustang arriving to provide assistance. Julia ends the fight by destroying one of Ashleigh's arms. Then, together with Ed and Al, she manages to stop the flow of magma into the Valley. With the Valley safe, Julia uses the rest of her power to heal Ashleigh , restoring his face and saving his life. However, both Ashleigh and Julia's Stars disintegrate, and Julia sacrifices her left leg and glimpses the Gate of Truth. Meanwhile, on the Cretan side of the border, Milosian resistance fighters seize Creta's main base and declare independence. Without Colonel Herschel to lead them, the Cretan forces retreat.

The next morning, Ashleigh wakes up in a hospital bed alongside Julia and is surprised to find his face restored. When Julia wakes up, she is informed that Ashleigh had already left, and is given an automail leg. She then meets Ed and Al as they prepare to leave Table City. Ed chastises Julia, saying that her decision to use the Star was wrong, but he doesn't think she's a bad person. Al promises to Julia that after he and his brother get their bodies back, they will be sure to visit. Julia tells them she will be waiting, as she must stay to lead the Milosians and preserve their newfound independence. Meanwhile, Ashleigh is seen donning his Cretan uniform and returning to Creta. Ed and Al then board a train to Central and take one last look at Table City before leaving.