Our movie begins with Major Kusanagi on a rooftop, listening in on a conversation between a high-level diplomat and a computer programmer, discussing his request for asylum in the US. Pretty soon the Ministry of Foreign Affairs stops by with a contingent of police to try and reclaim the programmer, but can't due to diplomatic immunity. In comes the Major, killing the diplomat and hiding out with thermoptic camouflage as she goes down the side of the building. Following this somewhat tense opening sequence, we begin the theme music and are treated with a view of the process that goes into assembling a cyborg's body, the Major's in this case.
The Puppet Master, the 'criminal' of the movie, first starts showing up as a pair of ghost-hacked individuals. The first, a garbage man, is supposedly hacking his ex-wife's brain(really a high-level secretary that he's had no dealings with), and a petty criminal that is supplying the means to hack his 'wife' to the other guy. After Bateau gives chase through the streets, Motoko catches up to the criminal half and, in a gorgeous display of thermoptic camouflage, proceeds to pound the daylights out of the unfortunate fellow. We then get an intriguing exposition on ghost-hacking and how it leaves behind empty shells with shattered lives.
Leaving these two, we find the Major diving in the harbor, and after she decides she's done, she has the first of a few philisophical discussions about the nature of one's ghost and being human. Following this intriguing bit of dialogue, we come to a nude cyborg standing in the middle of the road, where it gets smacked by a truck and brought to Section 9's attention. There we find out that the Puppet Master has apparently taken up residence by putting its ghost in the body, and makes claims for political asylum as a sentient being. At this point we discover that the Puppet Master is, or was, a software program developed by Section 6(International Affairs) to "grease the wheels of diplomacy" through a variety of sundry methods, but has since become self-aware and is seeking out the Major for its own reasons.
At this point, Section 6 steals the body in an attempt to cover up its involvement in the matter. Motoko and crew track the men from Section 6 down the people responsible, with Bateau and crew stopping the guys in the initial vehicle, and the Major trailing after the switch-to car, which ends up in an abandoned factory. Once there, Motoko goes to get the people in the car, but is stopped short by a thermoptics-equipped tank, which proceeds to blast away at the column the Major is hiding behind, as well as the walls past her. In an intense one-sided shootout(the Major's weaponry proves rather inneffective against the tank), the tank pulverizes the columns and walls around the Major, even shooting up a mural on the wall depicting an evolutionary tree, stopping just short of humans at the top.
After the tank runs out of ammo, the Major, in her own thermoptics, takes aim for the tank and, jumping on top of it, tries to crack it open. Putting so much force into it, she basically destroys her own arms and legs, when the tank does notice her, it shakes her off, picks her up, and starts crushing her skull, at which point Bateau shows up to save the day with a "big-ass gun" that he got from the equipment division.
Once free, they recover the Puppet Master from the back of the car and Motoko insists on ghost-diving right there. Bateau, uneasy with the idea, goes along and is forced to listen to just one side of the conversation as the Puppet Master converses with Motoko about the meaning of life and spreading new 'children' with her onto the Net. Accepting this, they merge just as Section 6 snipers aim to take out both Motoko and the Puppet Master, but fortunately for them, Bateau takes the bullets in the arm, and saves the new fusion of Motoko and the Puppet Master. He then takes what's left of Motoko to his safe house, and gets a new, albiet much smaller, body for her.
