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In the Second Age of Middle Earth, the Dark Lord Sauron forges the One Ring in Mount Doom to conquer all. An army of Men and Elves battle Sauron’s forces in Mordor, where King Isildur of Gondor slays Sauron, but the evil influence of the Ring corrupts Isildur, preventing him from destroying it in Mount Doom. Isildur is later killed by Orcs, and the Ring is lost, found and owned by Gollum for five centuries. The Ring is then found by a Hobbit named Bilbo Baggins.

Sixty years later, Bilbo celebrates his 111th birthday in the Shire, reuniting with his old friend Gandalf the Grey. Bilbo reveals he intends on leaving the Shire for one last adventure and leaves his inheritance to his nephew Frodo Baggins, including the Ring. Gandalf investigates the Ring, discovering its true identity and warns Frodo. Learning Gollum was tortured by Orcs and told them that Bilbo took the Ring, Gandalf instructs Frodo to leave the Shire, accompanied by his gardener Samwise Gamgee. Gandalf rides to Isengard, meeting fellow wizard Saruman the White, but learns he is in league with Sauron, who has unleashed the Nazgûl to find Frodo and imprisons Gandalf atop his tower. Saruman commands Sauron's Orcs to construct weapons of war and produce a new breed of Orc fighters: the Uruk-hai.. Frodo and Sam are joined by fellow Hobbits, Meriadoc Brandybuck and Peregrin Took, and they evade the Ringwraiths, arriving in Bree where they are meant to meet Gandalf, but are instead aided by a ranger named Strider, who escorts them to Rivendell.

While traveling to Bree, Frodo and Sam are joined by Merry and Pippin, and are nearly captured by the Nazgûl. At the Inn of the Prancing Pony, Frodo meets the mysterious ranger Strider, who hides them from their pursuers and agrees to lead them to Rivendell. During the journey they are attacked by the Nazgûl. Strider fights off the creatures, but Frodo is wounded by their Morgul Blade, which will turn him into a wraith. While being chased by the Nazgûl, Frodo is saved by the Elf Arwen, Strider’s lover who uses her magic to summon a surge of water that sweeps away the pursuing Nazgûl. Arwen takes Frodo to Rivendell where he is healed by her father, Elrond. Meanwhile, Gandalf escapes Saruman's tower with the aid of Gwaihir the Giant Eagle and travels to Rivendell. Elrond calls a council of the races still loyal to Middle-earth to decide what should be done with the Ring. It is revealed that the Ring can only be destroyed by throwing it into the fires of Mount Doom, where it was forged. When an argument ensues among the council members as to who would dare venture into Mordor, Frodo volunteers to take the Ring, accompanied by Sam, Merry, Pippin, Gandalf, and Strider, who is revealed to be Aragorn, Isildur’s heir and rightful King of Gondor. They are joined by the Elf Legolas, the Dwarf Gimli, and Boromir, man of Gondor, to form the Fellowship of the Ring. Bilbo gives Frodo his sword Sting.

The Fellowship set out but are hindered by Saruman's magic. They travel through the dwarf Mines of Moria . Inside, they find that Orcs have overrun the mines and slain the Dwarves; they also realize that Gollum is following them, determined to reclaim the Ring. The Fellowship is attacked by Orcs, a Cave Troll and a Balrog, an ancient demon of fire and shadow. Gandalf confronts the Balrog, allowing the others to escape, but both Gandalf and the Balrog fall into an abyss. Mourning Gandalf's death, the group flees to Lothlórien, where they are sheltered by its rulers, the Elves Galadriel and Celeborn. That night, Galadriel informs Frodo that it is his destiny to destroy the Ring. The Fellowship continue their journey. Meanwhile, Saruman creates an army of Uruk-hai to track and kill the Fellowship save Frodo.

After arriving at Parth Galen, Boromir gives in to the Ring's corruption and tries to take it from Frodo, believing that it is the only way to save his realm. Frodo manages to escape by wearing the Ring and becoming invisible. Boromir realizes what he has done, and attempts to find Frodo, who decides to continue his journey alone, heeding Galadriel's warning that the Ring will eventually corrupt the other members of the Fellowship. The Uruk-hai arrive and Aragorn, Legolas, and Gimli attempt to hold them off while Frodo escapes. Merry and Pippin lead the Orcs away from Frodo and are nearly killed. Boromir tries to redeem himself by trying to save them, but in the process is shot fatally by the Uruk-Hai leader, Lurtz. The Uruk-Hai capture Merry and Pippin. Aragorn slays Lurtz and tends to a dying Boromir, and promises him that the world of men will not fall. Boromir realises that Aragorn has overcome the power of the Ring and is the true leader. He dies content with Aragorn, Gimli and Legolas by his side.

Sam finds Frodo, who reluctantly lets Sam join him. Aragorn, Legolas and Gimli realise that Frodo has to walk a different path, and instead decide to rescue Merry and Pippin. As Frodo and Sam gaze out at the land before them, they grieve over the others. Frodo says that he is glad that Sam is with him and the two Hobbits set off towards Mordor.

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