Obi-Wan Kenobi, almost a full Jedi Knight, accompanies his Master Qui-Gon Jinn to Naboo on the orders of Supreme Chancellor Finis Valorum in an attempt to end the blockade of the planet, brought on by the greedy Trade Federation. But when they arrive, the Neimoidian Viceroy Nute Gunray is ordered by a shadowy figure known as 'Darth Sidious' to kill the Jedi, destroy the ship they came on (the Radiant VII), cut off Naboo's communications, and invade the planet with a huge army of battle droids, hover tanks, and STAP vehicles. The Jedi repulse the attack on themselves and stows away on two Federation landers, determined to warn the Naboo and the Republic of the Federation's heinous acts.On the surface, the Jedi encounter a Gungan exile named Jar Jar Binks, who offers the two sanctuary from the invading army at his underwater home town of Otoh Gunga. Trouble is, Gungan leader Boss Nass does not like "outlanders," hates the Naboo, and absolutely despises Jar Jar. Qui-Gon is forced to resort to mind tricks to get themselves a "bongo" to the surface, as well as save the clumsy Gungan from being pounded to death. The underwater journey proves even more harrowing, as they dodge various sea monsters.
On the surface, the Federation army has swiftly overwhelmed the pacifist Naboo, herding the people into concentration camps. At the capital city of Theed, Gunray orders the teenage Queen Amidala to sign a treaty legitimising the Federation's rule over Naboo (as well as avoiding Republic reprisals), or watch her people be systematically exterminated. She refuses to sign, and Gunray orders that she be taken to a camp.
As she is herded off with Security Chief Panaka and Governor Sio Bibble, the Jedi and Jar Jar arrive, barely avoiding a trip down a waterfall. Cutting down her captors, Qui-Gon recommends they take the Queen to Coruscant on her royal yacht to seek the aid of the Republic. He senses something more to all this, and suspects the Federation will kill Amidala and force a hand picked ruler to sign the treaty if she stays. Taking along a group of pilots and handmaidens, the small group boards the yacht and takes off. The yacht dodges the huge Trade Federation Navy in the orbit of Naboo. When the shield generator is shot, the courageous acts of a single astromech droid - R2-D2 - enables the ship to escape capture.
Unfortunately, the yacht's hyperdrive has been damaged, and the ship needs to make repairs. The nearest likely world is a desert planet called Tatooine, home of Jabba the Hutt. After harassing the Neimoidians at Naboo via hologram, and ordering them to kill Naboo's Council of Elders, Sidious sends his apprentice Darth Maul to track down the Queen, kill her Jedi protectors, and return her to Naboo to sign the treaty.
The yacht lands on the outskirts of Mos Espa, and Qui-Gon goes in disguised as a farmer to find a new hyperdrive. Along for the ride is Jar Jar, Artoo, and a young handmaiden the Queen insisted go along named Padme Naberrie. They find their way to a junk shop owned by a Toydarian named Watto. He has what they need, but they do not have the hard currency he needs. They also meet Watto's slave, a nine-year-old boy named Anakin Skywalker. It is love at first sight for Anakin as he introduces himself to Padme. A little later, he saves Jar Jar from the wrath of Sebulba the Dug and befriends the group. He brings them to his house as a sandstorm approaches, where the heroes meet his mother Shmi, as well as a protocol droid Anakin is rebuilding to help Shmi around the house - a prissy and harried robot named See Threepio.
Meanwhile at the royal yacht, the Neimoidians use a holo-transmission of Bibble (who stayed behind to interfere with their actions) to try to locate the Queen themselves. Obi-Wan, who stayed on the ship, orders the crew not to reply to the message (which would give the Neimoidians the trace they want). En route to Tatooine, Darth Maul is ambushed by Togorian pirates, whom he utterly wipes out.
Back at Anakin's house, the boy offers to use his own hand built Podracer at the upcoming Boonta Eve Classic Podrace (hosted by Jabba) to win the money the heroes need to repair the yacht. Despite the great danger, no one can see any other way to get the hyperdrive. This strangely gifted boy increasingly intrigues Qui-Gon. He is startled when Shmi reveals that Anakin has no father - he was apparently conceived by the Force itself - and downright shocked when a midichlorian count reveals Anakin to be THE strongest Force sensitive in existence.
The day of the Podrace arrives, as does Darth Maul (who immediately sends probe droids into the cities). As he waits, he takes on an entire Tusken raiding party single-handed. A Trooshti steals the battery from Anakin's Pod, but Padme and Jar Jar gets it back and helps the Trooshti save their nest in the process. Anakin's chief competition is the nasty Sebulba, who sabotages Anakin's Pod prior to race start. Despite this, a five-hundred mile an hour rush through horrendous obstacles, pot-shooting Sandpeople, and exploding fellow Racers.... despite all this, Anakin manages to win the Podrace and secure the new hyperdrive from Watto. And thanks to a bet Qui-Gon made with Watto, the boy has also won his freedom and a chance to become a Jedi Knight. Sadly, this means he will have to leave Shmi and Threepio behind on Tatooine. He tearfully promises to return and free them when he becomes a Jedi. Qui-Gon outwits a last ditch effort by Watto (at Gardulla the Hutt's urging) to keep the boy, and has him disable the explosive slave chip inside him.
As the heroes return to the yacht, Darth Maul finally strikes. It is all Qui-Gon can do just to hold him back as they take off from Tatooine. He introduces Anakin to Obi-Wan, who is jealous and leery of the young boy. Anakin also meets pilot Ric Olie, who helps acquaint him with flying Naboo-style ships.
Finally, Coruscant is reached and the heroes can enjoy a brief respite. Qui-Gon reports the apparent existence of the new Sith to the surprised twelve member Jedi Council, and then drops the bombshell about Anakin. They agree to meet the boy and test his potential. Although his potential in the Force is obvious, a little probing by Yoda highlights the glaring flaws in Anakin's character....
Elsewhere, Amidala meets with Palpatine, who informs her that the corrupt and weak Senate probably will not be any help at all - unless she forces the ouster of Supreme Chancellor Finis Valorum, Naboo's most ardent supporter. She will not hear of it - until she presents her case to the Senate, and sees first hand how bureaucracy and the Trade Federation's influence has destroyed the once-noble democratic institution, and any chance of saving her people with it. With Palpatine's lies about Valorum ringing in her ears, she loudly demands Valorum be impeached at once, and a new Supreme Chancellor elected.
While waiting for the Council to render their decision, Anakin, and Jar Jar helps a young boy and his malfunctioning nanny droid return home. A little later, the Jedi Council decides Anakin is indeed - not worthy for training as a Jedi. Not only is he too old, but also he has far too much anger and fear in him. Incensed at this, Qui-Gon defies the Council and announces he will train Anakin without their permission - Obi-Wan is ready to become a Knight, he declares. He believes Anakin to be the fulfilment of an ancient prophecy, the "Chosen One" who will bring "balance to the Force." The Council, led by Mace Windu and Yoda, calms the tense situation down by stating they will reconsider Anakin's fate at a later time. Right now, with Amidala resigned to returning to Naboo and sharing the fate of her people, they want Qui-Gon and Obi-Wan to go with her and protect her - and find out just what connection, if any, the Sith has with the invasion. As they leave, Sidious tells the Neimoidians he no longer needs her help at all - kill her when she lands.
But as the group returns to Naboo in the yacht, passing the sole remaining Neimoidian Battleship (a droid control ship - the others were no longer needed), they learn Amidala has not given up. Thanks to an off-the-cuff remark by Jar Jar, she sees a desperate last hope for her world. She asks to meet with Boss Nass and the Gungans, now forced out of Otoh Gunga by the Federation and hiding in sacred ruins. Nass is still unwilling to listen - until Padme the handmaiden reveals herself to be the true Queen Amidala, with handmaiden Sache acting as her decoy. She openly begs Nass for help, to take back what was both theirs. Nass, touched by her willingness not to belittle the Gungans, finally agrees to help them.
Sidious, suspecting some kind of attack, sends Maul to join the Neimoidians on Naboo. Moreover, attack is indeed, what is on the Queen's mind, but that is only a distraction. As a now-promoted General Jar Jar and the Gungans face the battle droids on the ground, she and the Jedi will sneak back into the royal palace and free the main hangar, allowing Olie and the pilots to fly their N-1 starfighters into orbit and attack the droid control ship. Destroy it, and the droids will be disabled. At the same time, she intends to capture Gunray in the throne room and end this war once and for all.
The battle proceeds as planned, except for two complications - Maul is waiting for them at the hangar, drawing the two Jedi off for a savage duel. At the same time, Anakin and Artoo hide in an N-1 only to find themselves taking off for the orbital battle on autopilot. The tide turns against the Naboo / Gungan / Jedi fighters on all fronts, with the Gungans being captured by the battle droids and Qui-Gon being brutally slain by Maul before Obi-Wan's horrified eyes.
Yet the tables are just as quickly turned. Amidala manages to capture Gunray and force his surrender. Anakin, guided by the Force without his even knowing it, flies into the droid control ship and blows up the main reactor, destroying the Battleship and cutting off the battle droids. And Obi-Wan, fighting down his rage and relying on the Force, delivers a fatal blow and watches the two cut halves of Maul tumble down a reactor shaft. With his dying breath, Qui-Gon asks Obi-Wan to promise that he will train Anakin. Obi-Wan agrees.
A few days later, the new Supreme Chancellor of the Republic, Palpatine, arrives on Naboo with the Jedi Council. Gunray and his lieutenant Rune Haako are being shipped back to Coruscant for trial, the Trade Federation's charter has been revoked, and the taxing laws that started the whole ordeal have been repealed. Palpatine praises Amidala's bravery in saving their world, and tells Anakin he will watch his career "with great interest." Yoda informs Obi-Wan that he is hereby promoted to Jedi Knight, and - over his own strong objections - the Council will allow Kenobi to train Skywalker. He urges Obi-Wan to keep a close eye on the would-be Jedi, as the future of this boy is still very clouded. Obi-Wan promises to be careful.
A sombre funeral is held for Qui-Gon that night, as his body is cremated. Obi-Wan tells a forlorn Anakin of the Council's decision. Yoda and Mace Windu mull over the remaining questions of this mess. Why was Naboo invaded? And was Darth Maul the Sith Master.... or merely the apprentice? Those questions must wait for another day, as the next morning a grand parade and presentation of the Orb of Peace to Boss Nass allows the Naboo to celebrate their salvation, and cheer the heroes who delivered them from evil....
"We will take back what is ours."
-Padme Naberrie Amidala, Queen of Naboo