WARNING: UNMARKED SPOILERS You have been warned.
Part I (Academy Phase)
The knights immediately recognize that Jeralt is the famous Blade Breaker and former captain of the Knight of Seiros and insists that he and Byleth return to Garreg Mach Monastery with them and the students. Though relucent, Jeralt agrees and the two return to the monastery, where the head of Garreg Mach and archbishop of the Church of Seiros, Lady Rhea, asks Jeralt to rejoin the Knights of Seiros. Much to everyone's surprise, she also offers Byleth to teach the students of the Officer's Academy as a professor. They both agree to the offers, but Jeralt privately warns Byleth not to trust Rhea. Byleth is then given the choice of leading one of the academy's three houses: the Black Eagles, the Blue Lions, and the Golden Deer, each populated by students from the Empire, Kingdom, and Alliance respectively. Byleth assumes their duties as the teacher for their chosen house, training their students and leading them in mock and real battles on behalf of the Knights of Seiros. Soon, it is discovered there is a conspiracy against the Church when Byleth thwarts an attempt to steal the Church's most valuable Heroes' Relic, the Sword of the Creator. Mysteriously, the Sword awakens when Byleth holds it, and Rhea allows them to keep it.
Byleth and their class are then sent to recover a stolen Heroes' Relic from a bandit clan, but the Relic turns their leader, named Miklan, into a monster, leading Byleth and their students to wonder about the true nature of Relics and Crests.
Later, a chapel at the monastery is attacked by demonic beasts, and Jeralt is murdered by a student in the confusion; the student is an agent of "Those Who Slither in the Dark", a cult that opposes the Church. Reading Jeralt's diary, Byleth discovers that Jeralt fled from the Church due to Rhea's plans for Byleth when Byleth was born. Byleth pursues the cultists responsible for Jeralt's death, but is led into a trap and sent to a plane of darkness by their leader, Solon. Sothis then explains that she now remembers she is the Progenitor God, implanted into Byleth in hopes she would be reborn. Sothis merges herself fully into Byleth, granting Byleth the power to escape the plane of darkness, though she sacrifices her individuality in the process. Byleth returns and defeats Solon with a newly empowered Sword of the Creator.
Upon returning to the monastery, Rhea leads Byleth to the Holy Tomb, where she attempts to awaken Sothis. Edelgard, revealed to have been the mysterious Flame Emperor the whole time, then attacks the Holy Tomb with her army, accusing the Church of being corrupt and secretly ruling Fódlan from the shadows, and it is revealed Rhea is a dragon in disguise; some routes further reveal her to be Seiros, with her attempts at resurrecting Sothis indirectly birthing Byleth. Depending on Byleth's choices and the house they lead, they may either side with any of the three houses or the Church. If Byleth sides with Edelgard, they help her lead an assault on Garreg Mach. If they side with Rhea, Dimitri, or Claude, then they help in the defense of the monastery. Regardless of the side, Byleth is on, they are knocked unconscious at the end of the battle and wake up five years later, discovering that Fódlan has been plunged into a vicious war as the Empire, Kingdom, Alliance, and Church battle each other. The routes then diverge.
Part II (War Phase)
Byleth and their forces head to the main base of "those that slither in the dark", where they learn that they are the remnants of the nation of Agartha, a technologically advanced civilization that was wiped out by Seiros' kindred in ancient times. Defeated, the Agarthan leader Thales calls down numerous javelins of light to destroy his own base. Rhea turns into her dragon form to protect Byleth and the others but is gravely wounded. After conquering Shambhala, Rhea reveals that Byleth's mother was her twelfth failed attempt to create a vessel capable of housing Sothis' consciousness; she conceived Byleth with Jeralt, but was forced to order Rhea to transfer the Crest Stone in her heart into Byleth to save them after they were stillborn. Rhea is suddenly driven mad by the power she used saving Byleth at Shambhala, and Byleth is forced to defeat her in a final battle. In the aftermath, the Empire, Kingdom, and Alliance are dissolved and Fódlan is unified under the Church with Byleth as its new ruler.
Having his purpose renewed and guided back on the path of light, he focuses on saving Fódlan and liberates the Kingdom from imperial rule, assuming his rightful place as king. With his own lands secure, Dimitri rescues Claude from imperial forces. Claude dissolves the Alliance and cedes its lands to Dimitri before departing Fódlan. Dimitri then marches for the Empire capital itself. Wanting to make peace with Edelgard, Dimitri arranges a meeting with her and suggest they join forces to realize their goals. Edelgard refuses, however, forcing his invasion into Adrestia. Dimitri is able to defeat Edelgard and once again offers her mercy, but is forced to kill her when she attempts to attack him. In the aftermath, Fódlan is united under the Kingdom with Dimitri as its ruler, while Byleth becomes the new archbishop of the Church when Rhea voluntarily steps down.
Byleth and Claude press on towards a strategic Empire fort, and receive aid from the foreign nation of Almyra. However, the fort is destroyed by a rain of javelins of light before they can seize it and the Almyrans decide to withdraw. Claude admits that he had secretly opened relations with Almyra, and announces his desire to open Fódlan's borders to the outside world and end the continent's isolationism. Byleth and Claude continue their advance, attacking the Empire capital. Edelgard is defeated and killed, but Byleth and Claude learn that "those who slither in the dark" have been manipulating both the current war as well as the war 1000 years ago. Rhea confirms the existence of the group, and Byleth and Claude set out to stop them.
Claude's army defeats the cult in their secret underground city and their leader Thales attempts to destroy them with another series of javelins of light, but Rhea intercepts the javelins in her dragon form and is gravely wounded in the process. Meanwhile, Nemesis is awakened from his tomb by the cult; he and his 10 Elites had merely been a band of thieves who took power from Sothis and her kin after they were slain by Nemesis in the ancient era. Their blood was the source of the nobility's Crests. Nemesis is resurrected by the cult as a final attempt to destroy Fódlan, but Byleth and Claude destroy Nemesis and his undead army. In the aftermath, Fódlan is united under the rule of Byleth, while Claude leaves to become king of Almyra and the two work to improve relations with Fódlan and other foreign nations.
Four of these mysterious figures introduce themselves as Yuri, the leader of the group and a former rogue; Balthis, a pugilist with a history of owing debt (and a friend of Hilda's family); Constance, the daughter of the fallen House Nuvelle; and Hapi, a dour young girl whose sighs can attract monsters. Together, they form the Ashen Wolves, a "fourth house" that has no official affiliation with the Officer's Academy. Here, beneath the monastery, they live in the subterranean city of Abyss, a refuge for those huddled masses of Fodlan under the auspices of the cardinal Aelfric. Aelfric is also an old friend of Jeralt, as well as Byleth's mother, Sitri. It is explained that the Ashen Wolves and the other denizens of Abyss have been allowed to exist under the condition that their affairs do not affect life in the monastery above ground, with Yuri serving as the de facto leader of the Wolves and looking after the Abyssians.
As of late, mercenaries have been poking around Abyss in search of something. Research into the matter eventually reveals their objective to be the Chalice of Beginnings, an ancient artifact said to be created by the goddess and, under the guidance of Saint Seiros and with the aid of the Four Apostles, was used in the Rite of Passage in the hopes of bringing life back to the goddess. When the Rite failed, the apostles and the chalice vanished from history. Byleth leads Yuri and company on an excursion ends in the retrieval of the chalice. When they return to Abyss, however, they receive troubling news: brigands have kidnapped Aelfric and are demanding the chalice in exchange for his life.
With Rhea's blessing, Byleth and Yuri confront and rout the kidnappers. Suddenly, however, Aelfric and Yuri betray the party: Aelfric intends to attempt the Rite of Rising in order to resurrect Sitri, for whom he had long harbored affections. Having found her preserved body in the depths of Abyss, he plotted and planned to bring together the Ashen Wolves, who carried Crests of the apostles, and sacrifice them to use their blood for the ritual. Yuri seemed to be a willing participant in Aelfric's scheme, one that would see him die as well.
Little does Aelfric realize, Yuri is actually working as a mole for Rhea, reporting his activities. He wasn't able to act against him since he was holding his old friends hostage, but, having relayed his plan to Byleth in secret beforehand, he secured their safety while setting himself and the other Ashen Wolves as bait to buy time for Byleth and the Knights of Seiros to save his friends. Aelfric gathers what blood he is able to and attempts the Rite of Rising, only for things to go horrifically awry as he mutates into a monster, forcing Byleth and company to put him down.
Rhea explains afterwards that Sitri was physically frail when she lived and, when she gave birth to a child whose heart didn't beat, beseeched Rhea to give them her "heart". Rhea honored Sitri's last request, then took her body into Abyss to preserve her, unable to bear the thought of simply laying a beloved friend in the cold earth.
With the situation resolved, Rhea officially announces that the Ashen Wolves house would be immediately disbanded, and its members would be free to do with their lives as they wished. Abyss would continue to serve as a refuge for those in need, with Byleth, Edelgard, Dimitri, and Claude vowing to look after the city and its people. Satisfied that Abyss is in good hands, Yuri and his pack part ways with Byleth.