Final Fantasy VII begins with Cloud joining AVALANCHE in a series of raids against the Mako reactors that surround the city of Midgar. Although the first mission is a success, AVALANCHE is trapped at another reactor during a subsequent raid. The reactor explodes, which sends Cloud flying from the upper levels of Midgar into the slums below. He lands unharmed on a flower bed, where he is formally introduced to Aeris. Prompted by the arrival of Shinra's Turks operatives sent to capture Aeris, Cloud agrees to work for Aeris as her bodyguard.
After Cloud defends Aeris from her would-be kidnappers, Aeris offers to show him the way back to Sector 7. Along the way, she mentions that her first boyfriend had been a first Class SOLDIER, as Cloud claims to have been. They then meet up with Tifa Lockhart, and the three infiltrate the mansion of crime boss Don Corneo. From him, the party learns that Shinra has discovered the location of AVALANCHE's hideout and plans to collapse the upper level of Sector 7 onto the slums below. Despite AVALANCHE's efforts to prevent it, Shinra successfully destroys Sector 7, killing its population and three members of AVALANCHE. The Turks finally capture Aeris, who the player learns is the last living member of the "Cetra," a race closely attuned with the planet. President Shinra believes that Aeris can lead him to a mythical land of fertility known as the "Promised Land," which he expects to be ripe with easily harvested Mako energy.
The remaining members of AVALANCHE, Cloud, Tifa, and Barret, infiltrate Shinra's headquarters to rescue Aeris. After freeing her and Red XIII, who joins the party, they escape when most of the personnel in the building, including President Shinra, are killed. Finding the body of the president skewered by a long sword, Cloud suspects a man called Sephiroth has returned from his presumed death. These suspicions are confirmed by an executive spared during the massacre, who claims to have witnessed Sephiroth murder the president and state that he would never allow Shinra to claim the Promised Land. The party also learns that during Sephiroth's attack on Shinra, the headless body of a creature named "Jenova" disappeared from the building's research facility.
While Rufus Shinra, the president's son, assumes control of the Shinra Company, AVALANCHE pursues Sephiroth across the planet, fearing his intentions for the Promised Land may be more destructive than Shinra's. During this pursuit, the party is joined by Yuffie, Cait Sith, Vincent, and Cid. As the journey progresses, each member of the group must come to terms with personal conflicts from their past, and the full scope of Sephiroth's plan is eventually revealed to the player: if the planet is significantly damaged, the Lifestream within will gather at the point of injury, attempting to heal the wound. Sephiroth explains that he intends to use a powerful spell known as "Meteor" to fatally injure the planet, inciting a reaction in the Lifestream to heal the wound before it can cause the planet's destruction. Entering the fissure created by the meteor's impact, Sephiroth would merge with all the energy of the planet, granting him god-like power over it. At an ancient temple erected by the Cetra, AVALANCHE attempts to undermine Sephiroth's plot by claiming the Black Materia needed to activate Meteor, but Sephiroth displays a mysterious power over Cloud, (which is most likely enforced through the Jenova cells, which Cloud and Sephiroth are both infected with) forcing him to relinquish it.
Fearing that Sephiroth may cast Meteor, Aeris sets off to stop him on her own. Concerned for her safety, AVALANCHE follows her to the northern continent, where the player enters an ancient Cetra city. After finding Aeris praying to the planet for aid, Sephiroth, unseen, begins affecting Cloud's behavior, once again, and attempts to force him to kill her. Cloud resists Sephiroth's command, but Sephiroth himself appears and kills Aeris. After laying her body to rest, the surviving characters resolve to defeat Sephiroth and avenge her.
Later, Sephiroth begins causing Cloud to doubt his ability to control his own actions. Cloud begins to doubt his memories and insists he is not a real human, but rather a specimen created from Jenova's genetic material by Professor Hojo. Jenova, the player learns, was an interstellar creature who crashlanded on the planet approximately 2,000 years earlier, arriving via travel on a meteor. This collision formed a large impact crater, grievously harming the planet. Jenova soon emerged from the crater, intending to infect all living organisms on the planet with a virus that would induce insanity and incite monstrous transformations. Among its victims were most of the Cetra, who were approached when Jenova used its mimic abilities to appear as their relatives. Attempting to defend itself, the planet created giant monsters called "WEAPONs", while the majority of humans fled rather than fight Jenova. However, a small group of Cetra survivors fought to defend the planet and managed to defeat Jenova, confining it within the fissure created by its landing. Afterward, the WEAPONs entered hibernation to await any future threat that could harm the planet. Eventually, the mummified remains of Jenova would be unearthed by Professor Gast, a researcher for the Shinra Company. Mistaking the creature for a Cetra, Gast was given authorization to conduct an experiment to artificially produce a Cetra by combining cells from Jenova with the fetus of an unborn child.
Five years before the present-day events, in a cutscene seen by the player, Sephiroth learned that he was the product of this experiment while on a Shinra mission in Nibelheim, the hometown of Cloud and Tifa. However, unaware of all details involved, he concluded that he was a Cetra who had been produced solely from Jenova's genetic material. Enraged, he burned down the town, intending to kill all descendants of those he believed had abandoned his ancestors in the defense of the planet. According to Cloud, he confronted Sephiroth during this massacre, after which Sephiroth vanished under unknown circumstances and was presumed dead until his reappearance in the Shinra building. When AVALANCHE reaches the Northern Crater, Sephiroth tells Cloud that he was not in Nibelheim, showing him images of a 1st Class SOLDIER with dark hair who occupies Cloud's place in his memories. With Tifa unable to refute Sephiroth's claims, Cloud goes crazy and, thinking it the right thing to do, gives the black materia to Sephiroth's real body, which is encased in crystalized Mako, which results in the WEAPONs' awakening. During the earthquake that follows, Cloud is separated from his companions and falls into the Lifestream.
As the meteor summoned by Sephiroth slowly approaches the planet, the Shinra Company focuses its efforts on protecting humanity from the WEAPONs, who have begun to perceive everything as a threat to the planet. The members of AVALANCHE are interrogated, and eventually nearly executed. They escape from Junon and obtain Cid's airship, Highwind. They then search for Cloud. They discover Shinra's plan to take Huge Materia from the major spots of the world. Barret Wallace saves his hometown from Shinra's escort, thus redeeming himself for building the Mako reactor there in the first place. They eventually find Cloud, locating him on a tropical resort island called Mideel where he washed up following the casting of Meteor; he is in a catatonic state. Unable to see Cloud like this, Tifa resolves that she will not leave Mideel until Cloud has fully recovered. The WEAPONs' destructive activity quickly causes the island to split open, depositing Cloud and Tifa into the Lifestream below. There, she reconstructs Cloud's memories and learns the truth about his past. Although the player learns he is a real human being and had actually been in Nibelheim during Sephiroth's attack, he never actually succeeded in joining SOLDIER and only managed to attain the rank of private in Shinra's military. The player learns that the dark-haired SOLDIER is named "Zack" and was Aeris' first boyfriend. During Sephiroth's destruction of Nibelheim, Zack, Tifa and Cloud fought Sephiroth in Nibelheim's Mako reactor. Although Tifa and Zack were defeated, Cloud and Sephiroth severely wounded one another. After decapitating the body of Jenova, which had been stored in the Mako reactor, Sephiroth is thrown into the Lifestream by Cloud, taking the creature's head with him. Rather than dying, however, his body and consciousness were crystalized in Mako inside Jenova's crater.
While Tifa was taken to safety in Midgar, Cloud and Zack were among the wounded survivors who were apprehended by Shinra as part an elaborate cover-up of Sephiroth's massacre. Professor Hojo subjected these survivors to an experiment, in which he performed the same enhancements given to members of SOLDIER. However, because Hojo conducted the experiment without any concern for the subjects' mental capacities to handle the procedure, all but Zack entered a comatose state. Nearly five years later, Zack broke free from his confinement and took Cloud with him. The player learns that the procedure used to enhance members of SOLDIER involved both Mako showers and the injection of cells from Jenova. The alien cells inhabiting Cloud's body allowed his mind to construct a false persona, built around Zack's behavior, fighting style, and description of Sephiroth's destruction in Nibelheim, but they also allowed Sephiroth to modulate his behavior. The cells' inherent ability to duplicate information led Cloud to believe he had been the 1st Class SOLDIER in Nibelheim, as Zack was killed outside Midgar by Shinra soldiers after saving Cloud's life, shortly before the beginning of FF7. During Zack's final moments, he tells Cloud to live "both of their lives" before taking his final breath. Afterward, Tifa discovered Cloud, who was wearing a Shinra Soldier 1st Class uniform, which Zack gave him at the Shinra mansion when they escaped from Hojo's experiment, and offered him a job with AVALANCHE.
With the truth revealed, Cloud awakens and rejoins AVALANCHE. Before he awakes, the few members of AVALANCHE recovered powerful magic, known as Huge Materia, to counter Shinra's attempts to destroy the WEAPONs and Meteor. During the next few segments, many members achieve their lifelong dreams, or settle their past. Cid Highwind became the first man in outer space, Yuffie Kisaragi encourages her father to return her hometown Wutai to its former glory, and Vincent Valentine learns the truth about his past. The player also learns that, in her final moments, Aeris was casting a spell known as "Holy", the only means of opposing Meteor. Though she succeeds, Sephiroth's focused will prevents the spell from taking effect and has been restraining it since. Deciding that humanity must be protected from the WEAPONs before Sephiroth can be approached, Shinra and AVALANCHE destroy the WEAPONs, but nearly all of Shinra's executives are killed in the process, seemingly including Rufus. Among the few survivors are Reeve Tuesti, revealed to be the repentant controller of Cait Sith, and Professor Hojo, who is revealed to be Sephiroth's biological father. He explains that he and his wife were assistants to Professor Gast, and offered up their unborn child as a test subject to research involving Jenova. When Hojo attempts to help Sephiroth gain mastery over the Lifestream afterward, AVALANCHE is given no choice but to fight and kill him. Cloud tells the remaining members of his team to go find what they are fighting for. Every member returns, including Cait Sith, who had been captured by Shinra Inc. for helping Cloud.
Red XIII's grandfather dies, and tells him to go with Cloud to the final battle. With each member of Cloud's group at peace with his or her past and all other opponents defeated, the group travels through the mantle of the planet to its core, where they defeat Sephiroth and free Holy. However, due to Meteor's already close proximity to the planet's surface, Holy is unable to destroy it alone. Selected as Meteor's target, Midgar is almost completely destroyed by the storms that spawn from its presence. However, sent by Aeris' spirit, the Lifestream itself rises from the planet to aid Holy by pushing Meteor away, allowing Holy to destroy it. During the epilogue that follows, Red XIII sprints through a canyon with his two cubs at his side, he proceeds up the cliff-face, which reveals a lush land of greenery, where the desolate landscape of Shinra's destroyed Midgar had once been. The fate of the rest of the team isn't revealed to the player. It is left purposely ambiguous.