Final Fantasy VII begins with Cloud joining AVALANCHE in a series of raids against the Mako reactors surrounding the city of Midgar. Although the first mission is successful, AVALANCHE is trapped at another reactor during a subsequent raid. The reactor explodes, launching Cloud from the upper levels of Midgar into the slums below. He lands on a flower bed, where he is formally introduced to Aeris. Prompted by the arrival of Shinra's Turks operatives sent to capture Aeris, Cloud agrees to be Aeris's bodyguard and defends her from the Turks. After meeting up with Tifa in Sector 7, they infiltrate the mansion of crime boss Don Corneo. The party learns that Shinra has discovered the location of AVALANCHE's hideout and plans to collapse the upper plate of Sector 7 onto the slums below. Shinra destroys Sector 7, killing its population and three members of AVALANCHE. The Turks capture Aeris, who is revealed to be the last surviving "Cetra", a race closely attuned with the planet, and previously thought extinct. President Shinra believes Aeris can lead him to the "Promised Land", a mythical land of fertility, where he expects to find Mako energy.

The remaining members of AVALANCHE infiltrate Shinra's headquarters to rescue Aeris. After freeing her and Red XIII, they escape when most of the personnel in the building�including President Shinra�are killed. Cloud suspects that Sepiroth, a man presumed to be dead, was behind the attack, suspicions confirmed by an executive who claims to have witnessed Sephiroth murder the president and state that he would never allow Shinra to claim the Promised Land. The party also learns that during Sephiroth's attack on Shinra, the headless body of a creature named "Jenova" disappeared from the building's research facility. While the president's son, Rufus Shinra, assumes control of the company, AVALANCHE pursues Sephiroth across the planet, fearing his intentions for the Promised Land may be more destructive than Shinra's. The party is joined by Yuffie, Cait Sith, Vincent, and Cid. Each member of the group must come to terms with personal conflicts from their past. The full scope of Sephiroth's plan is eventually revealed: if the world is significantly damaged, the Lifestream within will gather in an attempt to heal the wound. Sephiroth intends to use a powerful spell called "Meteor" to fatally injure the planet, inciting a reaction in the Lifestream to safeguard the planet. Sephiroth would then merge with all of the planet's energy, allowing him to be reborn as a god and rule over the planet.

At an ancient temple created by the Cetra, AVALANCHE attempts to undermine Sephiroth's plot by claiming the Black Materia needed to activate Meteor, but Sephiroth displays a mysterious power over Cloud, forcing him to relinquish it. Fearing Sephiroth may cast Meteor, Aeris sets off to stop him on her own. AVALANCHE follows her to the northern continent, where they enter an ancient Cetra city. After finding Aeris praying to the planet for aid, Sephiroth begins affecting Cloud's behavior, and attempts to force him to kill her. Cloud resists Sephiroth's command, but Sephiroth appears and kills Aeris. After laying her body to rest, the party resolves to defeat Sephiroth.

Cloud, however, begins to doubt his ability to control his own actions. Influenced by Sephiroth, Cloud becomes suspicious of his memories and insists he is not a real human, but instead a specimen created from Jenova's genetic material by Professor Hojo. Jenova was an interstellar creature who crash landed on the planet roughly 2,000 years prior to the the game's events. Jenova had intended to infect all living organisms on the planet with a virus inducing insanity and monstrous transformations; among its victims were most of the Cetra. Attempting to defend itself, the planet created giant monsters called "WEAPONs". The majority of humans fled rather than fight Jenova; however, a small group of Cetra survivors managed to defeat and confine Jenova. Eventually, the remains of Jenova were unearthed by Professor Gast, a researcher for the Shinra Company. Mistaking the creature for a Cetra, Gast was given authorization to conduct an experiment to artificially produce a Cetra by combining cells from Jenova with the fetus of an unborn child. Sephiroth learned that he was the product of this experiment while on a Shinra mission in Cloud and Tifa's hometown, Nibelheim. He concluded that he was a Cetra who had been produced solely from Jenova's genetic material. He burned down Nibelheim, intending to kill all descendants of those he believed had abandoned his ancestors in the defense of the planet. Cloud confronted Sephiroth during this massacre, after which Sephiroth vanished under unknown circumstances and was presumed dead until his reappearance in the Shinra building. When AVALANCHE travels to the Northern Crater to confront Sephiroth, he tells Cloud that he was not in Nibelheim, showing him images of a SOLDIER with dark hair who occupies Cloud's place in his memories. With Tifa unable to refute Sephiroth's claims, Cloud surrenders the Black Materia to Sepiroth, allowing him to cast Meteor. This in turn results in the WEAPONs' awakening. During the earthquake that follows, Cloud is separated from his companions and falls into the Lifestream.

As the meteor summoned by Sephiroth slowly approaches the planet, the Shinra Company focuses its efforts on protecting humanity from the WEAPONs. Meanwhile, the members of AVALANCHE obtain Cid's airship, the Highwind, and begin searching for Cloud. They find him in a catatonic state on a tropical resort where he washed up following the casting of Meteor. The WEAPONs' destructive activity causes the island to split open, depositing Cloud and Tifa into the Lifestream, where she reconstructs Cloud's memories and learns the truth about his past. It is revealed that Cloud never succeeded in joining SOLDIER, and that the dark-haired SOLDIER from his memories was actually Aeris's first boyfriend, Zack Fair. Zack, Tifa, and Cloud had fought Sepiroth during the latter's attack on Nibelheim. Although Tifa and Zack were defeated, Cloud and Sephiroth severely wounded one another. After decapitating Jenova, Sephiroth is thrown into the Lifestream by Cloud, taking the creature's head with him. Rather than dying, his body and consciousness were crystallized in Mako inside Jenova's crater.

Cloud and Zack were among the wounded survivors who were apprehended by Shinra as part of a cover-up of Sephiroth's massacre. Professor Hojo subjected these survivors to an experiment, performing the same enhancements given to SOLDIER members�a procedure which included Mako showers and the injection of Jenova cells. All but Zack entered a comatose state, and nearly five years later, Zack broke free from his confinement and took Cloud with him. However, the alien cells inhabiting Cloud's body also allowed Sephiroth to modulate his behavior. Moreover, the cells' ability to duplicate information allowed Cloud's mind to construct a false persona built around Zack's behavior, leading him to believe that he had been the 1st Class SOLDIER in Nibelheim. Zack was killed outside Midgar by Shinra soldiers after saving Cloud's life; during Zack's final moments, he tells Cloud to live both of their lives. Afterward, Tifa discovered Cloud, who was wearing Zach's SOLDIER uniform, and offered him a job with AVALANCHE.

After Cloud awakens, it is revealed that Aeris, in her final moments, was casting the spell "Holy" with the White Materia, the only means of opposing Meteor. Although she succeeded, Sephiroth had since prevented the spell from taking effect. Deciding to protect humanity from the WEAPONs before approaching Sephiroth, Shinra and AVALANCHE destroy the WEAPONs, although nearly all of Shinra's executives are killed in the process. Among the few survivors are Reeve Tuesti, who is revealed to be the repentant controller of Cait Sith, and Professor Hojo, who is revealed to be Sephiroth's biological father. He explains that he and his wife were assistants to Professor Gast, and offered up their unborn child as a test subject to research involving Jenova. After finding out that Hojo is trying to help Sephiroth gain mastery over the Lifestream, AVALANCHE kills him. Cloud tells his team to go find what they are fighting for, before they begin a final assault against Sephiroth. With each member of Cloud's group at peace with his or her past, the group travels through the Northern Crater to the planet's core. They defeat Sephiroth and free Holy, but the spell is unable to destroy Meteor alone. Selected as Meteor's target, Midgar is almost completely destroyed. However, the Lifestream rises from the planet to aid Holy in destroying the Meteor. During the epilogue, Red XIII runs through a canyon with two cubs at his side. He proceeds up a cliff-face, which reveals a lush land of greenery where Shinra's destroyed Midgar had once been.