At the top of the Empire State Building, Zeus tells his brother Poseidon that his master bolt has been stolen. He blames Poseidon's son for the theft. Despite Poseidon's claims of his son's innocence, Zeus gives him 14 days to return it, lest war break out.
During a field trip to an exhibition of Greek and Roman art, seventeen year old Percy Jackson, is lured away from the crowd by a Fury, Mrs. Dodds, disguised as his substitute English teacher, who then attacks him, questioning him about the lightning bolt. The incredulous Percy, who has no knowledge of this, is rescued by his Latin teacher, Mr. Brunner . After dispatching the Fury, Brunner gives Percy a sword disguised as a pen. On Brunner's instruction, Percy's best friend, Grover Underwood , takes Percy to a training camp for demigods, Camp Half-Blood, along with Percy's mother, Sally Jackson . Although Percy and Grover, who is revealed to be a satyr, make it to the camp, its defenses prohibit entrance to Sally, who is captured by the Minotaur, and disappears before Percy. Percy engages the Minotaur with the pen, which turns into a sword named Riptide, eventually killing the creature with one of its horns.
In touring Camp Half-Blood, Percy learns that Brunner is the mythological centaur Chiron, and the camp's trainer, and that his father is the god Poseidon. He also meets Luke Castellan , a son of Hermes, and Annabeth Chase , a daughter of Athena. While at the camp, Percy learns that water has the power to heal his injuries, and allows him to manifest his magical abilities.
Hades later appears and reveals that Sally Jackson is his prisoner, and proposes she be traded for the master bolt. Chiron instructs Percy not to bargain with the god, but to go to Olympus to convince Zeus of his innocence. Percy sneaks away from the camp to travel to the Underworld, along with Grover and Annabeth, who secure for him from Luke a portable shield, flying shoes and a map to Persephone's pearls, which allow them to exit the Underworld.
The trio is attacked by Medusa, but manage to decapitate her, and take the first pearl from her bracelet. They also take her head, which they later successfully use against a hydra that attacks them during their acquisition of the second pearl from the crown of a giant statue of Athena at theParthenon replica in Nashville, Tennessee. They acquire the third and final pearl from a roulette wheel at the Lotus Hotel and Casino in Las Vegas, Nevada, in part with help from Poseidon, who aids them against Lotus Eaters; these had moved from the island where Odysseus had met them to the Lotus Casino in Las Vegas. The map reveals an entrance to the Underworld in Hollywood, beneath the Hollywood Sign.
The trio enter the Underworld, where Percy attempts to explain to Hades that he is not the lightning thief. A melee ensues, and although they manage to escape with the rescued Sally, they are forced to leave Grover behind, in Persephone's "care", as they only had three pearls. They are confronted by Luke, who reveals himself to have been the real lightning thief. Expressing his desire for a new generation of rulers to take over Olympus, he explains that he had hoped that the trio would not have escaped the Underworld alive, and after stealing the bolt from Percy, the two engage in battle. After using his water powers to dispatch Luke, Percy arrives at Olympus, where he presents the retrieved bolt, and reveals the truth about Luke. Percy also requests that Zeus retrieve Grover from the Underworld, which the god agrees to. Poseidon explains to Percy the reason why they could not know each other during Percy's childhood, but expresses his love for his son. Percy returns to Camp Half-Blood, where he resumes his training, ending the film in the midst of a clash with Annabeth.
While the credits were rolling, Sally Jackson leaves Gabe with his stuff in a room. He wanted a beer and found a lock and a note on his refrigerator. Furious, he breaks of the lock only to find Medusa's head. The credits roll on as cracking noises are heard.