The book opens with Percy Jackson having a nightmare in which his friend, Grover Underwood, is running from an unidentified foe. Percy wakes just as the monster finds Grover hiding in a wedding dress shop. Percy is called to breakfast by his mother, Sally Jackson. Sally is thrilled that Percy made it to the last day of 7th grade without incident, because Percy, as the demigod child of a mortal mother and the Greek god Poseidon, has a history of attracting trouble. Sally tells Percy that Chiron, the activities director at Camp Half-Blood, doesn’t think it’s safe for Percy to return this summer. Percy is distressed because Camp Half-Blood (a summer camp dedicated to protecting and training demigods) is his favorite place. Sally promises they will discuss everything when Percy gets home, and Percy heads to school. 

Percy arrives at school where he and Tyson, his skittish friend who lacks a home, are soon targeted by the school bully, Matt Sloane. During gym glass, Sloane shows off a group of mean-looking prospective students. While playing dodgeball, Percy quickly realizes the prospective students are actually monsters who are armed with explosive dodgeballs and want to eat Percy and his classmates. Percy and Tyson manage to kill two out of the three but are nearly killed themselves when suddenly Percy’s friend, Annabeth Chase (another demigod, and daughter of Athena), appears and kills the last one. Annabeth tells Percy and Tyson they need to go to Camp Half-Blood immediately, but she is clearly unhappy about Tyson’s presence. Upon arriving at Half-Blood Hill, they find it under attack. 

Clarisse, daughter of Ares and a camp bully, is attempting to defend the perimeter of Camp Half-Blood from two fire-breathing Colchis bulls. While subduing the two bulls, Percy is astonished to discover that Tyson is immune to fire. Annabeth explains that Tyson is a baby Cyclops who was abandoned in New York City, which is why he cannot not be burned; Cyclopes work in the forges of the gods and are immune to fire. Clarisse then informs them that Chiron was fired and replaced by Tantalus because someone poisoned Thalia’s tree—the site that marks the location where Thalia, daughter of Zeus, sacrificed herself to save Luke, Grover, and Annabeth. Zeus turned his daughter into a pine tree, which powers an invisible barrier that protects the campers at Camp Half-Blood from monsters. 

Percy and Annabeth find Chiron while he is packing his things. The three agree that Kronos, the king of the Titans and the mastermind behind the plot to overthrow Mount Olympus, is likely behind the poisoning. Chiron then tells Percy and Annabeth that the tree only has a few weeks left, at which point the camp will be overrun by monsters. That night at dinner, Coach D (the god Dionysus, and the camp director at Camp Half-Blood) and Tantalus debate what they should do with Tyson. However, their conversation is cut short when Poseidon claims Tyson as his son, making him and Percy half-brothers. 

Percy is bullied relentlessly for having a monster for a brother and he starts to resent Tyson, even though he knows that it is not his fault. Annabeth and Percy initially team up for a chariot race, but they ultimately break the partnership after an argument about Annabeth’s hatred for Cyclopes. That night, Percy has another dream about Grover. He tells Percy that he is trapped in the Cyclops Polyphemus’s lair in the middle of the Sea of Monsters; Polyphemus thinks Grover is a lady Cyclops and he wants them to be married. Grover then explains to Percy that he was lured to Polyphemus’s island because the Cyclops possesses a powerful object imbued with a nature magic that attracts satyrs. The next morning, Camp Half-Blood’s chariot race is interrupted when lethal Stymphalian Birds attack. Percy, Annabeth, and Tyson manage to get rid of the monsters but Clarisse wins the race in their absence. 

Percy and Annabeth call a truce, and Percy tells her about his dreams. Annabeth guesses Polyphemus has the Golden Fleece, an object with immense healing powers, and she explains to Percy that it is the only thing that could cure Thalia’s tree. She and Percy ask if they can be granted a quest to find both the Fleece and Grover, but Tantalus gives the quest to Clarisse instead. Hermes, the messenger god, finds Percy later that night and offers him supplies (including a thermos filled with wind and a bottle of multivitamins), and encourages Percy to embark on the quest anyway. He also asks him to try to reason with his son, Luke, who has turned to Kronos’s side. Percy, Annabeth, and Tyson decide to leave on the quest, though Annabeth is not happy that Tyson is coming. Percy asks his father to help them catch up to a distant cruise ship, per Hermes’s instructions, and Poseidon sends a fleet of hippocampi to carry them. 

The three board the Princess Andromeda and are captured by Luke. Percy and his friends discover that the Titan Army has control of the ship and are using it as a base while they work to bring Kronos back to his true form so they can destroy Olympus. Luke taunts Percy, claiming that Chiron has been keeping an important prophecy from him. Percy, Annabeth, and Tyson narrowly escape by using Hermes’s wind to power a lifeboat. They land in Chesapeake Bay and are soon attacked by a Hydra, a mythical beast with regenerating heads. The Hydra nearly kills them but they are rescued by Clarisse, who brings them onto her ship—the CSS Birmingham

Percy and Annabeth tell Clarisse they should combine forces to find Grover and the Fleece but she refuses on the grounds that it is her quest, not theirs. The ship enters the Sea of Monsters but is severely damaged by the monsters Scylla and Charybdis. The engine starts to fail, and Tyson heads off to fix it. However, the ship explodes while Tyson is still inside. Percy is flung into the water and loses consciousness. He wakes on a raft with Annabeth and is heartbroken when he realizes that he and Annabeth are the only survivors. Percy asks Annabeth about the prophecy that Luke mentioned, and Annabeth reluctantly explains what she knows. According to Chiron, there is a prophecy predicting that the next child of the Big Three (that is, Zeus, Poseidon, and Hades) to reach the age of sixteen will make a decision that will determine the fate of Olympus and either save or destroy the Age of the Gods. Percy realizes that Kronos did not kill him last summer because Percy could still be useful to him, if he could manage to get Percy on his side. Annabeth continues on to say that Chiron assumed Thalia was the demigod from the prophecy when he first learned about her—nobody knew what to think after she died, until Percy came along.

Percy and Annabeth’s raft approaches an island, and they land at C.C.’s Spa and Resort. The two are quickly separated by C.C.'s helper for their treatments. Annabeth is offered a makeover while C.C., who is actually the legendary sorceress Circe, turns Percy into a guinea pig and locks him in a cage with the other men who suffered the same fate when they landed on her island. Annabeth returns and figures out Circe’s ruse, and she uses Hermes’s magic multivitamins to turn Percy and the rest of the guinea pigs human again. Percy discovers he was sharing a cage with the pirate captain Blackbeard and his crew, and Percy and Annabeth escape on Blackbeard's ship while the pirates pillage the spa. 

Percy and Annabeth sail on the Queen Anne’s Revenge and Annabeth admits she was wary of Tyson because it was a Cyclops who led to Thalia’s death. The ship then approaches the island of the Sirens, sea nymphs who lure sailors to their deaths with their song. Percy says they should stuff their ears with wax, but Annabeth tells Percy she wants to hear the song, as it is supposed to make a person wiser. She asks Percy to tie her to the mast so she cannot jump overboard once she hears the famously enchanting song. However, Annabeth manages to break free of her bonds and Percy is forced to dive in after her. Having grabbed hold of Annabeth, he is able to see the vision the Sirens have created for her; it consists of Annabeth having a family picnic in an idyllic version of Manhattan with her reunited parents and a reformed Luke. After they are out of harm's way, Annabeth admits the Sirens told her that her fatal flaw is “hubris,” or deadly pride, but their conversation is interrupted when they land on Polyphemus’s island. 

Percy and Annabeth scale a cliff and find themselves on a ledge overlooking Polyphemus’s lair. They discover that Clarisse is also being held captive, and that the cave’s entrance is blocked by a boulder that only Polyphemus can lift. However, Annabeth forms a plan; they enter the lair when Polyphemus lets his flock of sheep into the cave at sundown, with Percy riding on the underside of a sheep and Annabeth slipping in using her cap of invisibility. They manage to free Grover and Clarisse but are soon attacked by Polyphemus. Percy, Annabeth, Clarisse, and Grover are about to be killed when Tyson arrives, seemingly out of nowhere. Percy is thrilled to learn that his brother survived the explosion, and together they defeat Polyphemus. Though the ship is destroyed in the fight, Percy and Tyson are able to summon the hippocampi, who bring them to Miami. 

As they only have enough money for one plane ticket, Percy tells Clarisse to fly back to Camp Half-Blood with the fleece so they can save Thalia’s tree. Percy, Annabeth, Grover, and Tyson are then immediately captured by Luke and brought back onto the Princess Andromeda. Luke demands that they hand over the Golden Fleece and is enraged to learn they don’t have it any longer. Percy secretly contacts Camp Half-Blood with an Iris message and tricks Luke into saying he poisoned Thalia's tree, thus clearing Chiron’s name. Percy and Luke duel and Percy is nearly killed—he’s saved by Chiron’s timely arrival. Together with his fellow centaurs, they manage to overpower Luke’s army and carry the heroes to safety.

Percy and his friends return to Camp Half-Blood just in time to see Clarisse heal Thalia’s tree by draping the Golden Fleece on its branches. Chiron is reinstated as the activities director, and he announces another chariot race. Percy, Annabeth, and Tyson team up, and Percy and Annabeth publicly credit Tyson with their victory after they win. Hermes visits Percy again, and Percy apologizes for not being able to get through to Luke.

That night, he has a dream in which Kronos taunts him for prematurely celebrating their victory. Percy is woken abruptly by Grover, who tells him that the Golden Fleece’s magic worked “too well,” and he brings Percy to Half-Blood Hill. The Fleece magically resurrected Thalia out of the tree, and Percy realizes this was likely Kronos’s plan all along—there is now another child of the Big Three at play who could give Kronos a chance to overthrow Olympus.