U.C. 0068 - While giving his speech to declare the Autonomous Republic of Munzo's independence from the Earth Federation, Zeon Zum Deikun suddenly dies of a heart attack. This causes mass riots in the colony against the Federation while Degwin Zabi, Deikun's deputy, rises to power. In the midst of the chaos, Deikun's children Casval and Artesia, along with Artesia's pet cat Lucifer and Deikun's old friend Jimba Ral, stow away aboard a cargo ship headed for Earth to escape from the Zabi regime.
Three years have passed since Casval, Artesia and Jimba fled to Earth and sought refuge in the castle of Don Teabolo Mass, an aristocrat and trusted friend of the Deikuns, in Andalusia, Spain; Teabolo adopts the children and renames them Édouard and Sayla, respectively. After Jimba is killed in an assassination attack by mercenaries hired by Kycilia Zabi, the Yashima Group, whose president is a good friend of Teabolo, offers to relocate an injured Teabolo and the children to Texas Colony at Side 5: Loum. Upon their arrival, the children meet Char Aznable, who bears a striking resemblance to Édouard. Tragedy strikes the children when they receive word that their mother Astraia has died. After Lucifer dies, Édouard bids farewell to Sayla before heading to the Loum military academy. Meanwhile, Dozle Zabi invites Ramba Ral to participate in a top secret development project that will change the face of Zeon's military forever.
Following a security issue at the spaceport involving an antique gun inside Char's suitcase, Édouard and Char switch their clothes and Char boards Édouard's flight, which is sabotaged by Zeon forces. Having faked his death at the cost of his friend, Édouard assumes the identity of Char and undergoes training as a Zeon cadet. During training, Char befriends a young Garma Zabi. Two years later, a Federation ship disobeys orders from Zeon's traffic control and inadvertently crashes into and destroys an agricultural block, enraging the Zeon colonists and sparking open rebellion. Seizing this chance, Char convinces Garma to lead their fellow cadets on a daring night attack against the local Federation garrison, completely overwhelming them and forcing their surrender. Meanwhile, Gihren Zabi orders the cancellation of the MS Project due to a lack of progress, but Professor Torenov Y. Minovsky convinces him to resume the project after discovering a technological breakthrough. Elsewhere, a young Amuro Ray arrives at Side 7 with his father.
Following the success of the Dawn Rebellion, Degwin negotiates with Vice Admiral Revil to surrender all Federation assets and the complete withdrawal of Federation forces from Side 3 to prevent similar incidents from happening again. After bring reprimanded by Degwin for failure to look after Garma, Dozle sends Char - who motivated Garma into starting the rebellion - to Earth; in response, Char requests to become a mobile suit pilot when he returns. Feeling the burden of his responsibilities, Dozle proposes to cadet Zenna Mia. In the Earth city of Manaus, Char lands a job as a mobile worker pilot at a construction site. He meets a young Lalah Sune at a casino
On January 3, U.C. 0079, the Principality of Zeon declares war on the Earth Federation and massacres the anti-Zeon government of Side 2 "Hatte". At the same time, a mobile suit assault force led by Kycila captures the moon cities of Granada and Von Braun. At Side 7, Amuro and Hayato Kobayashi are dragged by Kai Shiden and his gang into trespassing in the colony's development sector, only to be arrested and beaten up by Federation guards before they discover Amuro's identity as the son of Tem Ray. Meanwhile, Dozle reveals to Ramba that Gihren has plans to use the captured Island Iffish colony to end the war.
On January 23, U.C. 0079, the Earth Federation and Zeon forces engage in a fierce naval battle at Loum. Dozle redirects his fleet away from the main battlefield to corner the Revil fleet. Char launches a surprise attack on the Revil fleet on his own before the Dozle fleet arrives and massacres the Federation forces.