The story of Tayutama revolves around the male protagonist Yuri Mito, whose family manages the local Shinto shrine. One day during spring break, Yuri and his friends Ameri Kawai and Sankurou Kaname find in the school's woods a mysterious relic that was used in the past to seal the Tayutai, an ancient, mythological race. Yuri discovers that the school board has determined that the relic is insignificant for preservation, and that it will be demolished to allow the school to expand. After coming to the conclusion that destroying the relic may have adverse consequences, the trio attempts to relocate the relic's spirits. As Yuri performs the ritual, he summons Kikuramikami no Hime, a Tayutai goddess who explains to him the belligerent relationship between humans and Tayutai; Kikuramikami then incarnates as a young girl, Mashiro, in hopes of maintaining a mutual relationship with humans. Shortly afterwards, the relic is destroyed in an accident, releasing the entire race of Tayutai. Among them are Nue, Houou, and Ouryu, three influential Tayutai who hold humans in low regard and are referred to collectively as the "Three Mightiest" (三強 Sankyō?). Following the incident, Yuri takes Mashiro to the Yachimata Shrine to live with his family, and later finds Mashiro as a teenager, who proclaims herself to be Yuri's wife.
In their attempt to create a world where humans and Tayutai can peacefully coexist, Yuri and Mashiro battle the members of the Three Mightiest in a successive, nonlinear order determined by the player's decisions. In one scenario, Nue, a young female Tayutai, begins to steal undergarments from the Flawless dormitories due to her curiosity in them. She is defeated by Mashiro and Mifuyu Kisaragi, and finds herself befriended by Mifuyu, who later begins to take care of her as a guardian. Yumina Takanashi, Yuri's stepsister, also begins to take care of Hou, an exhausted bird Tayutai who begins to nest on Yumina's head. Yumina is later attacked by Ou, another Tayutai who makes up the Houou couple with Hou, before the couple reconciles with the help of Yuri and Mashiro. Lastly, Ameri alliances herself with Ouryu, the last of the Three Mightiest, out of jealousy from the amount of attention Mashiro receives from Yuri. After Ameri reconciles with Yuri, Ouryu agrees to stop attacking humans, and acknowledges Mashiro's goal.