Approximately one-thousand years after the Jenova crisis, Jenova's body was recovered by the Shinra corporation, the same corporation who was draining Mako energy from the earth. Profesor Gast, their lead scientist, mistook Jenova for one of the Cetra. Wanting to recreate a Cetra, he began injecting Jenova cells into human babies. He started with small amounts, and created the people in Soldier. However, soon he began to give the children larger amounts. This began the Jenova project. The first successful attempt was on a woman known as Lucrecia, another scientist. The baby was soon known as Sephiroth. It wasn't long before he was known as the strongest and fastest man on earth, both with his sword, the Masamune, and with his materia.

Meanwhile, Doctor Gast had left Shinra to be with his wife, Ilfalno, and his daughter, Aeris. Soon, however they are discovered by the Shinra and Doctor Gast is killed. Ilfalno somehow manages to get away, and gets her daughter to Sector 7 of Midgar.

At the same time, another person, Cloud, was injected with a smaller amount of Jenova cells after birth. He had gone to join Soldier and had been injected with Jenova cells, but had failed to get into Soldier. Soon, along with Zack, someone who was really from Soldier, and Sephiroth, they went to the Nibelheim reactor to deal with some monsters who were being created. Once they got to the reactor, they find the monsters Hojo has been created. Sephiroth, realizing that he has been created in a similar way to this, locks himself in Shinra mansion's library. When Cloud next sees him, he has gone crazy and has hatched a plan to control the world. He gets past Cloud and burns the town. Then he heads towards Nibelheim reactor, where Jenova is stored. Cloud, in the Shinra suit, goes with Tifa and Zack to the reactor. Tifa gets there first, and finds her dying father. She grabs Sephiroth's sword and goes up the steps towards him. However, Sephiroth slashes her and throws her down the stairs. Then, Zack follows him into the J-E-N-O-V-A room. He is slashed as well, but doesn't die until later. Lastly, Cloud comes in and takes Zack's sword. He slashes Sephiroth, and runs out to help Tifa. Then, Sephiroth walks out past him. He follows Sephiroth, but Sephiroth slashes out behind him and catches Cloud in the shoulder. However, Cloud lifts Sephiroth up by the sword and throws him over the side.

Years later, Sephiroth shows up again. Cloud has invented an illusion of himself, that he was Zack. Cloud becomes part of a group known as AVALANCHE, a rebal group against Sephiroth. On a full rebelion against Shinra to get Aeris, the ancient child of Ilfalno and Dr. Gast, back, they are captured. However, they get out when Sephiroth comes in, wiping out the President and hundreds of Shinra soldiers. He has taken Jenova with him. They follow him, and soon meet up with the whole group: Cloud, Tifa, Nanaki, Barret, Cait Sith, and Aeris. It is claimed that they also meet up with two other characters: Yuffie, a ninja who was said to be as annoying as she was skilled at combat, and Vincent, a former member of the Turks who was as serious as Yuffie was annoying.

They follow him all over the world, until finally, they reach his main destination, the Temple of the Ancients. The group learns that he is after the Black Materia, one of the most famous materia that could summon Meteor, a mass destruction device that fed on the lifeforce of planets... by blowing them to smithereens. Cloud and his group decide to take out the black materia themselves by using Cait Sith's stuffed body. They do, and the second Cait Sith comes along, but Sephiroth uses the Jenova cells in Cloud's blood, combined with his magic, to cause Cloud to give him the Black Materia. While Cloud is still asleep after that disaster, Aeris runs off towards the City of the Ancients, to summon Holy, the anti-Meteor materia. Sephiroth soon follows.

Cloud and his friends follow, of course, but when they get there, Sephiroth controls Cloud again to attack Aeris. Cloud manages to resist, but Sephiroth jumps down from above and kills her with the Masamune anyway. The Holy materia, already summoned, drops from Aeris's hand into the water. Sephiroth gets away again, but not before dropping off a present -- in the form of a Jenova monster -- to the party. The group soon sets off towards the north, and through the mountains, towards the crater that was first caused when Jenova crashed. They travel through the mountains north of Icicle Inn. When they finally reach it, Cloud gives the Black Materia to one of his friends (it isn't known who), and sets off after Sephiroth.

Cloud is assaulted with images of Nibelheim, where an image of Sephiroth claims that Cloud was created just like Sephiroth. Soon, the group fights another Jenova monster. Then, Sephiroth controls Cloud to take back the Black Materia from his ally. Then, while many people arrive from Shinra (Scarlet, of the weapons department, Heidegger, Hojo, and Rufus), he is brought up to a sparkling Mako tree, where he gives the Black Materia to Sephiroth, who is encased in Lifestream energy (the real Sephiroth, not an image like all of the times before). The Black Materia becomes a part of Sephiroth. Meteor is summoned, the WEAPONS awaken, Lifestream energy literally bursts from the ground, and a massive magical barrier is brought into existance around the Crater. Although Cloud is sucked into the Lifestream, the others manage to get away (just!) on the Shinra's Highwind.