The last Emishi prince, Ashitaka, engages in battle with Nago, a giant boar demon attacking his village - Princess Mononoke introduction. During the fight, Ashitaka is wounded on his arm. After the boar is killed, the village wisewoman tells the prince that the wound is cursed and will spread to the rest of his body, eventually killing him. Ashitaka resolves to journey to the boar’s origin, the lands to the west, and find a cure for the curse. He cuts his hair, signifying his permanent departure from his village, and leaves on Yakul, his red elk.
Some time later, Ashitaka passes by a village being attacked by samurai. Some of the men attack him, forcing Ashitaka to defend himself. His cursed arm displays supernatural powers, primarily superhuman strength, causing his arrows to remove limbs and even the head of one man. In a nearby town he meets Jigo, a wandering monk who aids him in buying rice. That evening, the monk tells Ashitaka that he might find help by the forest spirit in the mountains of the west populated by giant animal gods. The monk also adds that the forest is a no-go zone for humans.
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A nearby town in the mountains of the west, called Iron Town (or Ironworks), continually clears the nearby forests to make charcoal to smelt ironsand, leading to battles with the giant forest beasts attempting to protect their diminishing forest. In one such battle, three giant wolves, led by the wolf god Moro, attack villagers transporting rice. They are accompanied by San, a human girl adopted by the wolves whom the people of Iron Town call “the Wolf Girl” and “Princess Mononoke” (meaning “pesky demon” or “poltergeist”). In the attack Moro and several villagers are injured.
The day following the battle, Ashitaka finds two injured villagers near a river. While rescuing them, he sees San treating Moro’s wounds, and she disappears quickly. He returns the villagers to Iron Town passing through a forest full of bestial gods, including diminutive tree spirits called kodama. Also in the forest is the Forest Spirit (Shishigami in the original Japanese), described as a “god of life and death”, who takes the form of a deer-like Spirit during the day and a large shadowy “night-walker(Deidarabocchi in the original Japanese)” at night.
Ashitaka is given a warm welcome when he reaches Iron Town. He learns from the leader of Iron Town, Lady Eboshi, that the giant boar which cursed him was once a forest god called Nago and that Eboshi had shot the boar, driving it to madness. On hearing this, Ashitaka is filled with rage and must restrain his right arm from killing Eboshi. He is dissuaded from doing so by lepers whom Eboshi has taken under her care and employed as gunmakers. She also employs former prostitutes in her famous ironworks in order to free them from brothels.
When Iron Town is infiltrated by San, who attacks Eboshi, Ashitaka intervenes using his curse’s power to stop the two sides’ fighting and takes San back to the forest, but is severely wounded when he is shot through the chest. With his curse’s power, he manages to open the gate and leave the town, but collapses soon afterward. San presents Ashitaka to the Forest Spirit, who heals his wounds but does not remove the curse. San soon learns that the boars, under the leadership of the boar god Okkoto, are planning another attack on Iron Town.
Eboshi prepares for the assault and sets out to destroy the Forest Spirit, whose head is believed to grant immortality. Jigo, who is now revealed to be a mercenary-hunter, plans to give the head to the emperor; in return the emperor promises to give Iron Town legal protection against the envious daimyos coveting the town’s prosperity. Eboshi, however, suspects (correctly) that the emperor’s agents are also assigned to take control of Iron Town at the most opportune moment. Meanwhile, Ashitaka recovers and falls in love with San.
However, Moro, who is poisoned by the bullet Eboshi shot into her, warns him that he cannot save San. In the ensuing battle, Iron Town and the Imperial agents set a trap for the boars, devastating their army, while Jigo’s hunters corrupt Okkoto with a poisoned iron ball, the same as Nago. Badly wounded, Moro attacks Okkoto to save San, who was trapped on his snout while trying to stop him from turning into a demon. The Forest Spirit appears and kills both Moro and Okkoto, though San is saved.
While Ashitaka cleans the demon worms from San, Eboshi shoots off the Forest Spirit’s head while it is transforming into the night-walker and in turn loses her arm to Moro, who revives long enough for one last strike against her sworn enemy. Jigo collects the head as the Forest Spirit’s body turns into a “mindless god of death” that begins covering the land in a lethal black ooze that kills everything it touches. The hunters scatter and the population of Iron Town is forced to flee to the surrounding lake as the god destroys the town in search of its head.
Ashitaka and San chase down and take the head from Jigo and return it to the Forest Spirit. It collapses into the lake, and the land becomes green again and all the lepers and accursed, including Ashitaka, are healed. Unable to give up the life each of them is used to, Ashitaka and San part but vow to see each other as much as possible. Ashitaka decides to live at Iron Town, which a reformed Eboshi vows to remake as “a better”, much simpler village. The film ends with a Kodama appearing in the rejuvenated forest, signifying that life has finally started again.