(SPOILER)First, the cast of characters: Vaan, Penelo, Ashe, Balthier, Fran, Basch, and Larsa (Larsa comes in as a guest, but is not playable). You've probably gotten that Vaan and Penelo are orphans from Rabanastre right now. Other orphans, who show up in XII but don't become major characters until XII:RW are Kytes and Filo. Balthier and Fran are sky pirates. Ashe is the princess of Dalmasca, in hiding due to her supposed death. Larsa is a prince of Arcadia's ruling family, house Solidor, and brother to Vayne Solidor, the main villain of the story.

The heroic adventurers wind up meeting up and leading a war against the Archadian empire, which invades and quickly takes over Dalmasca in the beginning of XII. Basch, a high ranking captain in the Dalmascan army, is framed for the murder of the king of Dalmasca, in a savvy political move by Vayne, the heir apparent of Arcadia. The real murderer is Basch's brother, one of Arcadia's judge magisters. As the war progresses, Vayne kills his father, frames the Senate for his death and has them arrested, and takes sole control of Arcadia.

Balthier's father, Doctor Cid, runs Draklor Laboratories, the weapon research lab of Arcadia. You quickly find out that he is studying nethicite, a strange type of magicite with the odd property of absorbing Mist, the magical energy that pervades Ivalice. This research leads to the ability to manufacture (manufact) nethicite, though their manufacted version is a pitiful imitation of the deifacted nethicite that was created by the gods and given to the Dynast King: The three relics of the Dynast King, the Dawn Shard, the Midlight Shard, and the Dusk Shard are deifacted nethicite. It was the power of deifacted nethicite that annihilated the city of Nabudis at the beginning of the game.

You eventually learn that Vayne and Cid are both working with an entity called "Venat". Venat is one of the Occuria, the entities that pose as Ivalice's gods, and the ones who created the nethicite, through the use of an artifact called the Suncryst. Our fearless adventurers are sent to the Suncryst to acquire nethicite to fight Arcadia with. Instead, they act all noble and destroy the thing.

Eventually, the group stops all the main villians in a big climatic battle containing details unimportant to the story of XII:RW. The details of importance are this: Larsa takes over the rule of Arcadia. Basch replaces his brother as a judge of Arcadia, letting everyone believe he is dead. Ashe rules Dalmasca and works with Larsa and Basch to improve both countries. Vaan and Penelo get an airship and become sky pirates, and join up with Balthier and Fran for new adventures at the start of XII:RW. And, finally, the explosion of the Suncryst caused a vast amount of Mist to be expelled across Ivalice, and will be touched on later in the story.