The movie opens with Poseidon (Kevin McKidd), walking out of the sea and into NYC. After climbing to the top of the Empire State Building, Zeus (Sean Bean) shows up, and asks Poseidon what he sees. Poseidon says he sees thunderclouds, and Zeus replies that there's no lightning. Zeus then explains that it (Zeus' lightning bolt) has been stolen, and he believes that Poseidon sent his son, Percy, to steal it. Zeus gives an ultimatum. Either Percy returns the lightning bolt within 14 days, before the summer solstice, or else there will be war. Poseidon is furious that Zeus would threaten his son, but realizes he can't change the god's mind. Zeus rips open a doorway, and travels up to Mount Olympus.
We next see Percy Jackson (Logan Lerman) sitting underwater for quite some time. When he finally surfaces, his best friend Grover (Brandon T. Jackson) comments that he was under for 7 minutes. Percy responds that the only place he can think is underwater. (Percy suffers from both Dyslexia and ADHD)
We see Percy and Grover (Who uses crutches) walking through school to English class. They have a substitute teacher, Ms. Dodds (Maria Olsen), who asks Percy to explain a quote on the board. However his Dyslexia causes the letters to float around, making it impossible for him to read. Percy goes home and talks to his mom Sally Jackson (Catherine Keener) about how school is going terribly. His mom says that things will get better soon, and that one day he'll understand why everything is like this. Then, Gabe Ugliano (Joe Pantoliano), Percy's step-dad gets home. He's a smelly (as in lack of hygiene) jerk, who forces Sally to get him a beer from the fridge and treats her and Percy like crap. Percy gets fed up, but Gabe threatens him and he backs off.
The next day, Percy and Grover go on a field trip to a Greek Museum, which is led by Ms.Dodds and Mr. Brunner (Pierce Brosnan) a wheelchair bound Latin teacher. Mr. Brunner asks Percy a few questions about demigods (the children that are born when gods "hook up" with mortals), which Percy is able to answer thanks to his Dyslexia translating an ancient Greek tablet. Ms. Dodds then asks to speak to Percy. She leads him into a closed off exhibit, and teleports to the top of some scaffolding. She then hisses at Percy, asking where the lightning bolt is, before turning into Alecto, a Fury and one of Hades' servants. Percy is freaking out, has no idea what's going on, and is about to die before Mr. Brunner and Grover show up. Mr. Brunner threatens Alecto, and she flies away. Grover explains that he is Percy's protector, and that they have to go to camp.
Percy still has no idea what's going on, but goes with Grover. Mr. Brunner also gives Percy a pen, claiming that it's a powerful weapon. Grover and Percy get to Percy's apartment to get his mom, and Grover proves to be very adept with his crutches, knocking out Gabe when he tries to stop them from leaving. Percy, Sally, and Grover are driving to camp, and Percy still has no idea what's going on. His mom tells him that it has something to do with his father, but doesn't elaborate. However, the group is attacked by the Minotaur, and crashes the car. Grover reveals that he's a Satyr (Half man, half goat) and uses the crutches to help disguise his goat legs and feet. They try to escape the Minotaur by running under an arch that reads Camp Half-Blood, but Sally is unable to enter due to a magical barrier. The Minotaur catches her, and squeezes her into gold dust. Percy gets ticked, and the pen Mr. Brunner gives him turns into a Greek sword. He then battles the Minotaur, eventually ripping off one of its horns and stabbing it, finally killing it. Percy then passes out.
Three days later, Percy wakes up in the infirmary at Camp Half-Blood. After getting oriented, Grover shows him around camp, and points out Annabeth (Alexandra Daddario), a daughter of Athena. We also find out that Mr. Brunner is actually Chiron, a centaur and famous teacher of heroes. He reveals to Percy that he is a son of Poseidon, and that the god's are on the brink of war because of the theft of Zeus' lighting bolt. He wants to take Percy to Olympus to show the gods that he isn't the lightning thief. But first, Percy needs to train. Finally, he reveals that Percy's mom made many sacrifices for him, including marrying Gabe, whose pungent smell prevented monsters from realizing Percy is a demigod.
A game of capture-the-flag is going on, ancient Greek style. This includes swords, shields, spears, bows, arrows, daggers, and anything else you can think of. Percy is put on Luke's team. Luke (Jake Abel) is one of the oldest campers, and is a son of Hermes. He loans Percy a helmet, and sticks by him when things get intense. Eventually, Luke is holding 3 of Ares' (God of War) children at bay while Percy looks for the flag. He finds it, but also runs into Annabeth, who immediately starts dueling him. She easily defeats Percy, cutting several of his tendons and forcing him to the ground. But, Percy hears Poseidon's voice in his head, and crawls to a nearby creek. The water heals him, and boosts his strength and reflexes. He is able to disarm Annabeth, and wins the game.
That night at dinner, Annabeth talks to him about how their parents, Poseidon and Athena, hate each other, but that doesn't mean that Percy and Annabeth have to be enemies. However, things get broken up when Hades shows up as a twenty-foot flaming demon. He reveals that he has Percy's mother, from when the Minotaur "killed" her earlier. Hades is willing to trade Sally for Zeus' bolt, which he believes Percy has.
Although Chiron forbids him, Percy sneaks out of camp that night, desperate to save his mother. Grover and Annabeth catch him, and when they realize Percy can't be stopped, they go with him. First, they go to Luke to find out how to get to the Underworld. Luke tells them that all the gods are selfish and cruel, and is more than happy to help. He gives them a map that will lead them to four locations: The gates of the Underworld, and the location of three Pearls of Persephone. Persephone (Rosario Dawson) is Hades' reluctant wife, and often has affairs with other men. The Pearls allow the guys to quickly get out of the Underworld if Hades finds them. Luke also gives Percy a pair of winged shoes he stole from Hermes, and a shield.
The trio of heroes make their way to the first Pearl, which is located in Aunty Em's Garden Emporium, a place full of decorative statues. It appears to be deserted, so they split up to find the Pearl. Grover finds a statue that looks a lot like a relative of his, down to the location of mole. As it happened, that relative was killed by... Medusa! At the same time, Annabeth finds a woman screaming about how someone turned her husband to stone, and how they have to get out of there. Medusa finds them, however, and turns the woman to stone, and traps Annabeth. Percy and Grover try to figure out how to kill Medusa, with Percy using his iPhone as a mirror, since only looking into Medusa's eyes turns you to stone. Long story short: Grover and Annabeth distract Medusa, and Percy decapitates her. Annabeth decides to keep Medusa's head, as her stone gaze still works if you look at her eyes.
After finding the Pearl on Medusa's bracelet, Percy, Grover, and Annabeth hijack Medusa's truck to get to the next location: The replica Parthenon in Nashville. After they stop at a motel for the night, Percy and Annabeth start to grow closer, but this is interrupted when Grover, watching TV, finds a missing person report on Percy. Gabe is claiming that Percy kidnapped his mother and is now on the run. Since they can't do anything about it now, the trio just heads down to Nashville.
When they finally reach the Parthenon, they see the next Pearl on the statue of Athena, but can't reach it. They hide in the bathroom until closing, and then use sleeping darts to knock out the night janitors. Percy uses the winged shoes to get the pearl, but the janitors wake up and reveal that they're actually the Hydra. The Hydra attacks and nearly kills the heroes, but Percy discovers that he has hydrokinesis (He can control the movement of water), and is able to slow it down. However, Grover kills the Hydra by pulling out Medusa's head and turning it to stone.
Happy with their success, the group goes to the final pearl location: The Lotus Casino in Las Vegas. They make it to the casino, but they find that it is the lair of the Lotus-Eaters. Whenever you eat the Lotus plant, all you want to do is remain there, doing nothing else for all eternity. The group gets sucked into the Casino, but Percy hears Poseidon's voice again, and manages to wake up from his trance. He realizes what's going on when he meets a kid from 1971 playing pinball, and also manages to wake up Grover and Annabeth. They find the last Pearl (being used as a roulette ball), hijack another car, and escape.
Finally, they make their way to the gates of the Underworld. As it turns out, the depths of Hell are located beneath... Beverly Hills! Yeah, I wasn't really that surprised.
After traveling to Hades' palace, Percy, Annabeth, and Grover meet Persephone, who leads them to Hades (Steve Coogan). Hades says that he wants Zeus' bolt so that he can rule Olympus, as he's sick of living in the Underworld. Percy insists that he doesn't have the bolt, but Hades doesn't believe him, and threatens to destroy his mother, who suddenly appears. Percy throws aside his shield to see his mom, but it breaks open, revealing the lightning bolt inside. Yes, Luke stole the lightning bolt because he hated the gods for ignoring him, and wanted them to destroy themselves. He knew that the missing lightning bolt would cause a war, and that he could take over once the gods had wiped each other out.
Hades doesn't care about Luke though; he's just happy to have the bolt. Just as he's about to kill Percy, Persephone betrays her husband, and knocks him out with the lightning bolt. She knew that a war between the gods would cause her to lose any happiness she had left, leaving her only with Hades, who she hated. She gives the bolt back to Percy, but also points out that the group, with Sally now included, has only 3 Pearls for 4 people; someone will have to stay behind. Grover, as Percy's protector, volunteers, and the others use the Pearls to teleport to the Empire State Building to get to Mount Olympus.
However, Luke shows up with another pair of flying shoes and steals the lightning bolt again. Percy then uses his shoes to chase after Luke, which climaxes in Percy using the water from several water towers to pulverize Luke and throw him into the ocean. Percy and Annabeth then travel to Mount Olympus (Sally stays behind since she's mortal) and arrive with the lightning bolt a few seconds after the deadline. Zeus decides to let it slide, however, and peace reigns. Percy and Annabeth both get to talk to their parents, with Poseidon telling Percy that he regrets not being able to stay with him and Sally, but his godly responsibilities forced him to leave. Percy forgives his father, and the two shake hands.
The movie ends with Sally dropping Percy back off at Camp Half-Blood, saying that he belongs there. Percy finds Grover, who was released from the Underworld, and is ecstatic that after successfully "protecting" Percy, he is now a Senior Protector First Class (he also gets some very small horns). Chiron forgives Percy for running away, as heroes can train all they want, but in the end their instinct is what makes them a hero. Finally, Percy and Annabeth have another friendly duel, with Annabeth almost kissing Percy.
Shortly after the credits, we see Sally kicking Gabe out of her apartment. He wants to get a beer first, but sees the fridge is locked with a note on front: NOT TO BE OPENED UNDER ANY CONDITIONS! I MEAN IT! Percy. Gabe ignores the note, breaks the lock off, and opens the door to find the head of Medusa staring back at him.
*CUT TO THE CHASE*
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Luke is the lightning thief.
He stole the lightning to create a war between Zeus, Poseidon, and Hades in the hopes that it would destroy the old gods so that the demigods could rule Olympus.
Percy and Luke fight, Percy wins.
When he returns the lightning to Olympus, Zeus calls off the war, and Poseidon speaks to Percy, saying he will always be there.
Percy and his mother Sally go back to Camp Half-Blood, where Percy aims to continue training. Sally tells Percy that she has kicked out Gabe, his disgusting stepfather.
At camp, Percy meets a newly appointed senior guardian Grover with sprouted horns (released by Persephone) and goes to the training fields to spar with Annabeth.
After the first credit break, we see Gabe breaking a lock on his refrigerator, only to find Medusa's severed head inside.
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