In the 23rd century, a catastrophic interplanetary war known as "The Fall" aka "The Great War" has left Earth devastated. 300 years later in 2563, while scouting the junkyard metropolis of Iron City, scientist Dr. Dyson Ido discovers a disembodied female cyborg with a fully intact human brain. Ido attaches a cyborg body to the brain, who does not have any recollections of her past, and names her "Alita" after his deceased daughter, for whom he originally built the body. As Alita wakes to learn about this unfamiliar world, she meets and befriends Hugo, a charismatic young man who passionately dreams of moving to the wealthy sky city of Zalem someday. Hugo also introduces her to the competitive sport of Motorball, a battle royale race wherein cyborg gladiators fight over a ball and win by bringing it to the finish line. Secretly, however, Hugo generates funds meant to buy his way into Zalem by mugging cyborgs and stealing their parts for Vector, an entrepreneur who owns the Motorball tournament, who in turn aims to use the parts to put together his own unbeatable champion.
Alita discovers that Ido is a Hunter-Warrior when she follows him one night, and they are ambushed by three cyborg serial killers led by Grewishka. When Ido is injured, Alita instinctively attacks the cyborgs, killing two of them and severely damaging Grewishka, who retreats underground. Despite Alita rediscovering her skill in the ancient martial art of "Panzer Kunst", Ido discourages her from becoming a Hunter-Warrior. The next day, Alita finds and brings home a highly advanced cyborg body from a crashed spaceship outside the city. Recognizing the body as that of a Berserker — lethal shock troops of the rival United Republics of Mars (URM) from the war centuries ago — Ido refuses to install Alita in it, not wanting to see her life being tied to her previous warrior identity.
Frustrated with Ido, Alita mangles a trolley and registers herself as a Hunter-Warrior; then she and Hugo enter the Kansas Bar to ask other Hunter-Warriors in helping her take down Grewishka, but they flatly refuse as Grewishka is not on the wanted list. A narcissistic Hunter-Warrior named Zapan provokes Alita, who proceeds to beat him up, triggering a chaotic bar brawl until Ido arrives to intervene. Suddenly, an upgraded Grewishka storms into the bar and challenges Alita to a duel, revealing that he has been sent by his boss and Zalem's technocrat overlord, Nova, to destroy her. Despite her courage and combat skills, Alita's body is sliced up by Grewishka's chain-bladed fingers, but then McTeague, a fellow Hunter-Warrior, arrives with his hounds, forcing Grewishka to retreat. Ido, feeling guilty over Alita's suffering and seeing the futility of trying to stop her from getting in harm's way, transplants Alita into the Berserker body, which automatically adapts itself to her.
Having fallen in love with Hugo, Alita enters a Motorball tryout race as a means to earn prize money to help send Hugo to Zalem. Ido discovers that the other contestants are Hunter-Warriors and wanted cyborgs hired by Vector, under order from Nova, to kill her. He warns Alita, and as the race begins, she destroys many of the contestants with her superior skills. Meanwhile, the relationship with Alita ends up inspiring a crisis of conscience for Hugo, who subsequently decides to quit his secret job. When he confronts his gang, who are in the process of mugging another cyborg, Zapan shows up, murdering the cyborg and framing Hugo for the killing. Hugo calls Alita for help, and, storming out of the Motorball race in response, she finds Hugo just as Zapan catches up to him. Having previously (and correctly) deduced that Hugo is a person of some importance to Alita, Zapan mortally wounds him and tells Alita that Hunter-Warrior law dictates that she must either kill Hugo or let Zapan finish him off. Dr. Chiren, Ido's ex-wife and a master cyborg engineer working for Vector in order to return to Zalem, has a change of heart and offers to help save Hugo by attaching his severed head to Alita's life support system. When Zapan sees through the trick and attempts to stop Alita from leaving, she commandeers his prized Damascus Blade and slices his face off.
Ido transplants Hugo's head onto a cyborg body before telling Alita that Hugo is lied to by Vector, who fabricated the false promise that Hugo can eventually buy his way into Zalem. Ido confides that as an exiled citizen of Zalem, he is certain that citizens of Iron City cannot enter Zalem unless they become Motorball champion. Alita decides to storm the Factory and confront Vector, and learns through Vector that Chiren has been harvested for her organs (for she will be sent to Zalem this way). Vector then calls in Grewishka to kill her, but this time thanks to her new nanomolecular body, Alita destroys him with ease. She then interrogates Vector and forces Nova, who is secretly pulling Vector's strings, to mind-control Vector and converse with her. When Nova taunts about harming her friends, Alita fatally stabs Vector and tells Nova that he made the mistake of underestimating her.
Ido then contacts Alita and tells her that Hugo has fled and is desperately attempting to climb a cargo tube towards Zalem. Alita chases up and pleads with Hugo to return with her. He eventually agrees, but a serrated defense ring dropped from Zalem by Nova shreds his body and throws him off the tube. Despite Alita leaping after him in a rescue effort, Hugo, realizing his demise to be inevitable due to the damage he sustained, thanks her for saving him before falling to his death.
Months later, Alita is the star athlete of the Motorball tournament. Cheered by the crowd, she secretly pledges vengeance by pointing her sword towards Zalem, where Nova watches her from above.