Sixty years later, Bilbo leaves the Ring to his nephew, Frodo Baggins. Upon learning that the Ring belonged to Sauron, the Wizard Gandalf the Grey warns Frodo that Sauron's forces will come for him. Gandalf catches Frodo's gardener Samwise Gamgee "eavesdropping" underneath a window and sends him with Frodo to leave the Shire. Gandalf rides to Isengard to meet with the head of his order, Saruman the White, who reveals that Sauron's servants, the Nazgûl, have been sent to capture the Ring. Saruman reveals himself to be in service to Sauron, and imprisons Gandalf atop his tower. Saruman commands Sauron's Orcs to construct weapons of war and produce a new breed of Orc fighters: the Uruk-hai.
While traveling to Bree, Frodo and Sam are joined by Merry and Pippin, and are nearly captured by the Nazgûl. At the Inn of the Prancing Pony, Frodo meets the mysterious ranger Aragorn, who hides them from their pursuers and agrees to lead them to Rivendell. During the journey they are attacked by the Nazgûl. Aragorn fights off the creatures, but Frodo is wounded by their morgul blade, which will turn him into a wraith. While being chased by the Nazgûl, Frodo is saved by the Elf Arwen who uses her magic to summon a surge of water that sweeps away the pursuing Nazgûl. Arwen takes Frodo to Rivendell where he is healed by her father, Elrond. Meanwhile, Gandalf escapes Saruman's tower with the aid of Gwaihir the eagle and travels to Rivendell. Elrond calls a council of the races still loyal to Middle-earth to decide what should be done with the Ring. It is revealed that the Ring can only be destroyed by throwing it into the fires of Mount Doom, where it was forged. When an argument ensues among the council members as to who would dare venture into Mordor, Frodo volunteers to take the Ring, accompanied by Sam, Merry, Pippin, Gandalf, and Aragorn. They are joined by the Elf Legolas, the Dwarf Gimli, and Boromir, man of Gondor, to form the Fellowship of the Ring.
The Fellowship set out but are hindered by Saruman's magic. They travel through the dwarf Mines of Moria. Inside, they find that Orcs have overrun the mines and slain the Dwarves; they also realize that Gollum is following them, determined to reclaim the Ring. The Fellowship is attacked by Orcs and a Balrog, an ancient demon of fire and shadow. Gandalf confronts the Balrog, allowing the others to escape, but both Gandalf and the Balrog fall into an abyss. Mourning Gandalf's death, the group flees to Lothlórien, where they are sheltered by its rulers, the Elves Galadriel and Celeborn. That night, Galadriel informs Frodo that it is his destiny to destroy the Ring. The Fellowship continue their journey. Meanwhile, Saruman assembles a force of Uruk-hai to hunt the Fellowship.
After arriving at Parth Galen, Boromir gives in to the Ring's corruption and tries to take it from Frodo, believing that it is the only way to save his realm. Frodo manages to escape by wearing the Ring and becoming invisible. Boromir realizes what he has done, and attempts to find Frodo, who decides to continue his journey alone, heeding Galadriel's warning that the Ring will eventually corrupt the other members of the Fellowship. The Uruk-hai arrive and Aragorn, Legolas, and Gimli attempt to hold them off while Frodo escapes. Merry and Pippin lead the Orcs away from Frodo and are nearly killed. Boromir tries to redeem himself by trying to save them, but in the process is shot fatally by the Uruk-Hai leader, Lurtz. The Uruk-Hai capture Merry and Pippin. Aragorn slays Lurtz and tends to a dying Boromir, and promises him that the world of men will not fall. Boromir realises that Aragorn has overcome the power of the Ring and is the true leader. He dies content with Aragorn, Gimli and Legolas by his side.
Sam finds Frodo, who reluctantly lets Sam join him. Aragorn, Legolas and Gimli realise that Frodo has to walk a different path, and instead decide to rescue Merry and Pippin. As Frodo and Sam gaze out at the land before them, they grieve over the others. Frodo says that he is glad that Sam is with him and the two Hobbits set off towards Mordor.