Twenty years before the events of X-Men, Charles Xavier and Erik Lehnsherr, two mutant-rights activists, encounter an extremely powerful telepathic pre-teen — Jean Grey. At the behest of her parents, the two men bring her into their care to teach her how to control her powers.
Ten years later, another young mutant — Warren Worthington III — deals with his own mutation. Having sprouted feathery wings, he attempts to cut them off in his bathroom with a rasp. When his father stumbles in on him, the older man vows to find a cure for his son's "sickness."
Shortly after the events of X2, Logan (Wolverine) and Ororo Munroe (Storm) lead several young mutants in a survival exercise in the Danger Room, a special combat simulator at the X-Mansion. Meanwhile, a heartbroken Scott Summers (Cyclops) is haunted by memories of his deceased partner. He is not alone in his turmoil — Professor Xavier also senses her presence. Cyclops decides to return to Alkali Lake, where Jean Grey apparently sacrificed herself to rescue her fellow X-Men. Shortly thereafter, Professor X is teaching an ethics course, using either video or a live feed of his colleague Dr. Moira MacTaggert, Xavier discusses the possibility of transplanting one's mind into a brain-dead person in order to sustain one's life. The ethics class is then interrupted by a telepathic disturbance in which Xavier pauses and dismisses his class immediately. Moments later shocking news comes over the television: Warren Worthington II, head of the Worthington Pharmaceutical Company, has announced that scientist Dr. Kavita Rao has developed an antigen that suppresses mutation. Suddenly, the X-Men face the philosophical dilemma of whether or not their mutant powers are gifts or hindrances. Especially affected is young Rogue, who cannot touch another person without draining their energy. Dr. Hank McCoy, a former student of Xavier and US Cabinet member, returns to the mansion to offer his counsel.
In a San Francisco office building, resisting his father's wishes to cure mutation, Warren Worthington III (Angel in the comics, though that name is unused in the film), escapes from a high-rise office building using his now full-grown wings.
All over the country, mutants rally together to discuss the ramifications of the "cure." At a rally in a crumbling church, Magneto and Pyro warn their fellow mutants that the cure will be used to exterminate mutants on a genocidal level. Recruiting Callisto, Arclight, and Kid Omega (whose powers appear to be those of Quill in the comics; see "Cast Notes" below), Magneto attempts to locate Mystique, who had been captured trying to steal information about the "cure". The group ambushes a prison convoy, freeing her along with the Juggernaut and the Multiple Man, and prepare to assemble an army to ambush the medical facility holding the source of the antigen--a pre-teen mutant named Jimmy, codenamed Leech in his government file, whose own power is to remove the mutant abilities of others while in their proximity — and whose blood is the ultimate source of the "cure". In their escape from the convoy, however, a guard shoots Mystique with a "cure" gun. As her blue color and morphing abilities wither, Magneto — who sees the gun as proof of his beliefs regarding forced treatment — abandons her as a casualty of war.
At Alkali Lake, Scott re-encounters Jean, evidently alive, but then he suffers a terrible fate. Sensing trouble, Professor X deploys Wolverine and Storm to investigate. When the arrive at the lake, they encounter an unconscious Jean. Returning to the mansion, a grave Professor X explains that when Jean survived the dam collapse depicted in X2, she unleashed a powerful split-personality which he calls Phoenix, previously kept in check by his telepathic blocks. Across the country, Callisto senses that Jean is now a "Class 5" mutant, and more powerful than even Magneto. Waking from her sleep, Jean again loses control, and escapes to her parents' house.
There, Magneto and Professor X vie for her loyalty. The enraged and resentful Jean disintegrates Professor X for his manipulation of her mind, and escapes with Magneto just as Wolverine and Storm attempt to intervene. Devastated by their loss, the remaining X-Men hold a funeral for their teacher, and then prepare to band together under Storm's leadership. Students Colossus, Kitty Pryde, and Bobby Drake (Iceman) unite with Storm, Wolverine, and McCoy, who now resurrects his old X-Men codename: Beast. Notably absent is Rogue, who has snuck off to seek "the cure."
Using information from the de-powered Mystique, the army attempts to capture Magneto's army only to realize they have been deceived by Multiple Man. Magneto and his Brotherhood of Mutants have already moved on to San Francisco. To reach the Worthington Laboratories facility on Alcatraz Island, Magneto manipulates the Golden Gate Bridge to it. As his mutants rush onto the island, the army counterattacks by firing syringes of the antigen. As mutant after mutant is de-powered, Arclight unleashes her shock wave powers, smashing through the army barrier. She, Kid Omega and Psylocke break into the facility. Inside, they find Dr. Rao and Warren Worthington II. Kid Omega kills Rao, while Psylocke and Arclight drag Worthington to the roof where he is rescued by Angel.
In the midst of the chaos, the X-Men arrive to defend the island against the Brotherhood. As old friends Pyro and Iceman engage in battle, Kitty Pryde follows Juggernaut into the lab, looking for Jimmy. When they each locate the boy, Kitty tricks Juggernaut into charging toward them, knocking himself unconscious running full-force into a wall, depowered around Jimmy. Outside, the battle rages, with Storm killing Callisto and Iceman defeating Pyro. Magneto encourages Jean to channel her full power against the labs. As Jean disintegrates mutants and humans by the dozen, Wolverine manages to distract Magneto long enough for Beast to stab him with four syringes full of the antigen. As Magneto's powers fade, he escapes from the island a broken man, muttering in horror, "What have I done?"
With Jean raging out of control, Storm and the rest of the X-Men get to safety. Wolverine, with his healing power that resists disintegration, is the only one who can reach Jean, and he makes his way to her step by painful step as she unrelentingly tries to kill him. When he reaches her, the old Jean returns for a moment, horrified herself, and asks that he kill her. Telling Jean, "I love you," he stabs her with his adamantium claws and she dies in his arms.
In the aftermath, Storm and Wolverine resume duties of running and maintaining the mutant academy. Rogue has returned, and confesses to Bobby she has taken the "cure", having decided that giving up her powers is better than living a life untouchable. McCoy is appointed to an ambassador position at the United Nations, with the President declaring an end to mutant oppression.
In a park, Erik Lehnsherr, now simply an ordinary old man, sits alone at a chessboard, looking tired and despondent. Then he reaches out, tentatively, toward a metal chess piece, and it gives an almost imperceptible shake, hinting either that he may have retained some of his mutant power after all or that the cure itself may be temporary, despite the claims that the cure is permanent. The film credits roll. In Ireland, Dr. MacTaggert suddenly hears Xavier's voice, realizing that Xavier had transplanted his consciousness into the mind of her brain-dead patient. (This can be assumed since in the ethics class near the beginning of the movie, he is seen telling his students about the possibility of shifting one's mind into a brain-dead person in order to sustain one's life).