The film is set in New York City in 1939.
Hindenburg announcer: Attention. Please prepare for docking procedure.
The moment his zeppelin docks in New York, Dr. Vargas sends a pair of bullet-like metal vials to Dr. Jennings, another scientist; within moments, Dr. Vargas is gone and his name is crossed off a list. Editor Paley is concerned Reporter Polly Perkins, who is investigating the missing scientists, is getting in over her head.
Paley: I don't like it when you smile at me.
Polly: You don't like my smile?
Paley: I don't like what's behind it!
Polly: It's only a movie, Mr. Paley. I'll bring you some popcorn.
Dr. Jennings arranges to meet reporter Polly Perkins during a showing of The Wizard of Oz at Radio City Music Hall. They discuss the disappearance of the world's top scientists. He hints that he and the missing men have a connection.
Dr. Jennings: I shouldn't have come
Polly: Doctor, you said you knew who was next.
Dr. Jennings: Yes, well... don't you see it? There is only one left.
Polly: Who? Who is it, doctor?
Dr. Jennings: Me! He's coming for me.
Polly: Who? Who's coming?
Dr. Jennings: Totenkopf... it's Totenkopf!
Totenkopf is German for death's head. Jennings drops a blueprint, which Polly picks up.
Polly's return to the office is sidetracked when New York is invaded by flying robots that shoot laser rays out of their heads and crush people and property under their enormous feet.
Polly is in a phone booth when the robots invade. She describes the robot invasion to Paley over the phone.
Paley: Polly, listen to me. I want you to get out of there. I want you to put the phone down, close your notepad, and the hell out of there.
Polly: Wait a minute. I can see something now coming into sight above the Palisades. They're crossing Sixth Avenue... Fifth Avenue... they're a hundred yards away...
Paley: Polly. Polly!
Polly: Oh, my God.
Police Sergeant: They've broken through the perimeter. Send reinforcements... send everything you've got!
The overwhelmed military broadcasts a call for help to someone called Sky Captain.
Joe: This is Sky Captain. I'm on my way.
As Polly runs along the streets photographing the robots and gathering information for a story, Sky Captain, a.k.a. Joe Sullivan, appears in his Warhawk airplane, which is equipped with amazing high-tech modifications, to fight the monsters.
He trips up several robots and the rest retreat after they received an unknown radio signal. Sky Captain flies over the sidewalk where Polly is standing.
Polly snaps a picture of Sky Captain flying overhead.
Joe has one of the downed mechas taken to a base near New York, home of his mercenary air force, and turns it over to his gum-chewing technical expert Dex.
As Joe taxi's his plane into the hangar, we see Dex testing a ray gun.
Dex: I thought you said this thing was big? Can I have it?
Joe: You find out where it came from and I'll buy you one for Christmas.
Polly follows and surprises Joe in his office. Polly and Joe have a back-story; they were an item some years before in Nanjing, but split up amid suspicions on her part that he was cheating.
Polly: It's been three years, Joe. You're not still mad at me, are you? Can't even remember what we were fighting about.
Joe: You sabotaged my plane.
Joe: I spent six months in a Manchurian slave camp because of you. They were gonna cut off my fingers.
Polly: Joe, for the last time, I didn't sabotage your damn airplane!
Dex walks in on Joe aiming a gun at Polly.
Dex: Oh, great, we all made up!
Polly uses Dr. Jennings' blueprint, which turns out to be a plan for the killer robots, as leverage to convince Joe to work with her -- and let her ride along when he goes after the robots.
Polly: A man came to see me today, a scientist. He was terrified. Said someone was coming for him. I asked him who he was so afraid of and he repeated one name: Totenkopf. He nearly went white when he said it.
Dex: Totenkopf. Who is he?
Polly: He's the invisible man. I've been through every library record twice, looking for anything. I've called every contact I have from Paris to Bangkok. This is the only thing I could dig up. He ran some kind of secret science unit outside of Berlin before the start of World War I. Something called Unit 11. It's been more than 30 years since anyone has spoken his name. Until today.
First Polly and Joe go to see Dr. Jennings in his laboratory.
Joe [laughs]: What?
Polly: I missed you. Thanks for saving my life today, by the way.
Joe: Oh, were you down there?
Polly: You missed me, too! How nice.
She breaks the window at Dr. Jennings office and unlocks the door.
Polly: It's open.
But they have arrived too late. He's been attacked by a mysterious woman in black, who escapes from Joe while Polly speaks to the dying scientist. Jennings gives her the two metal vials he received from Dr. Vargas and says that if Totenkopf acquires them, he'll destroy the world. He dies before he can explain.
Back at Joe's base, the flying robot "birds" attack in full force.
Joe: Come in, Dex.
Dex: Look, whatever you do, don't shoot!
Joe: Uh, okay.
Dex: You shot it, didn't you?
Dex explains the signal is coming from one of the machines, they have to kept in one piece. Joe notices one of the machines has an energy arc on the front of its hull and believes this is the one sending the control signal, and he pursues it.
The robot birds head to the city to retrieve the city's generators, with Joe on their tail. Joe, following Polly's directions, leads them on a nearly street-level flying chase through Manhattan while Dex tries to trace the source of the robots' control signal.
Polly: Go left. There's a shortcut down Broadway. You can catch them on 42nd street. I know these streets like the back of my hand. Go left!
Polly continues with directions as they zigzag through the streets.
Joe: It's a dead end. Some short cut!
Polly: That's... not supposed to be there.
After Polly's faulty directions nearly crash them into a building.
Joe: "Shortcut.' Heh!
Polly: I got us here, didn't I?
Joe throws off the pursuing robots by diving his plane into the ocean. Polly's sure they're going to die, but the plane can function as a submarine so they're able to resurface and fly back to base.
Polly: You mean you knew this the whole time and you let me think we were going to crash? I thought we were gonna die! You should have said something!
Joe: Look, Polly, it was your idea to tag along, not mine. If you can't take it, that's not my fault.
At the base, Dex ID's the signal and is the last one to evacuate. However, large robots attack him and he takes one out by shooting it with his ray gun, but a second one captures him.
Joe and Polly arrive in time to exchange fire with a departing squad of robots lead by the mysterious woman in black. The robots have taken Dex, but a brief search reveals that Dex left a clue. Stuck to a downed girder with bubblegum is a scrap of map on which he marked the source of the control signal: a remote valley in the Himalayas.
Joe: Good boy, Dex.
Joe and Polly take off immediately to get Dex back. In Nepal, Kaji, a contact of Joe's, reluctantly agrees to take them to the valley of Shambala. He notes that in Hebrew it's called Eden, "and you may know it as Shangri-la."