Percy Jackson has been having nightmares about Grover, the first involving him running from an unseen force and taking refuge in a wedding dress shop. At school, a group of Laestrygonians attack Percy and his classmates in a fiery game of dodge-ball, but he is saved by his half-brother Tyson (a young Cyclops). Annabeth takes Percy and Tyson to Camp Half-Blood by the taxi of the Gray Sisters, but they arrive to find the camp under attack by two bronze Colchis bulls which Tyson defeats. Thalia's tree has been poisoned, leaving the camp vulnerable to enemy attacks and Chiron is suspected of poisoning it (largely because of his family connection to the titan Kronos).

Percy tells Annabeth about his dreams, and she deduces that Grover has found the Golden Fleece, which can cure Thalia's poisoned tree. After the campers are attacked at a chariot race by Stymphalian birds, Tantalus (who was replacing Chiron as camp counsellor) sends Clarisse on a quest to find the Golden Fleece, as Percy, Annabeth, and Tyson run away from camp in order to try to find Grover. Hermes gives them gifts to help them on their quest and tells them to call on some Hippocampi, who carry them to a passing cruise ship, the Princess Andromeda. Once aboard, they discover that the ship appears to be deserted, but find fully stocked cabins to sleep in. In the morning, they wake to find the ship full of tourists, but also populated with monsters. They are captured by Luke Castellan, whom the ship belongs to, transporting an army of monsters. Luke sends them to be fed to a drakon in the hold, but they escape on a lifeboat and eventually find land, a marshy swamp area. They find one of many hideouts that Luke, Thalia, and Annabeth built. Percy and Annabeth talk about Luke briefly while Tyson looks for powdered doughnuts, but he soon returns, with an actual box of doughnuts. They find a doughnut shop (Monster Donut), but a hydra appears, having tracked them. After a brief fight, it is about to kill them, when they are saved by Clarisse, who is sailing on a confederate battleship called the CSS Birmingham.

En route to the Sea of Monsters, the CSS Birmingham is destroyed by the monster Charybdis and then attacked by Scylla. Presuming Tyson and Clarisse are dead, Percy and Annabeth escape to a nearby island, where they find "CC's Spa and Resort". CC has an assistant give Annabeth a tour of the resort, saying that Percy needs a full makeover. She shows Percy the best version of himself with magic, and gives him a magical drink. However, when he drinks it, he is turned into a guinea pig and CC puts him into a cage with six 'mean looking' others. When Annabeth returns, the spa resort's owner is revealed to be the sorceress Circe, who turns men into guinea pigs and put them in a cage. Annabeth asks for a moment alone with Percy, and then uses Hermes' anti-magic vitamins to protect herself from Circe's magic, and turn Percy and the others, who are revealed to be the crew of the notorious pirate Blackbeard (the demigod son of Ares), back to normal. Percy and Annabeth then manage to escape Circe's island by stealing Blackbeard's ship, the Queen Anne's Revenge.

Percy and Annabeth reach Polyphemus' island, where they are reunited with Tyson and Clarisse, who survived the shipwreck. They rescue Grover and find the Golden Fleece, and are returned to the mainland by Hippocampi. Clarisse returns to Camp Half-Blood with the Fleece by plane. Percy and company are captured by Luke and taken to the Princess Andromeda. Percy manages to contact Camp Half-Blood through an Iris Message and tricks Luke into admitting that he poisoned Thalia's tree, proving Chiron's innocence in front of the entire camp. Luke duels Percy, beats him, and is about to kill them, but before he does, Chiron and the Party Ponies, a large group of centaurs armed with modern weapons such as paint-ball guns appears, and rescues them.

Returning to the camp, Chiron is given his job back and the Golden Fleece heals Thalia's tree. However, the Golden Fleece revives Thalia Grace, who is pushed out of the tree.