Natsu, Erza, Lucy, Gray, and Happy are on their way back to Fairy Tail when they notice the townspeople whispering and pointing at them. They wonder what is going on and soon see. Fairy Tail has been attacked and there are several iron pillars sticking out of the building. Mirajane approaches them and tells them that it was Phantom Lord. She takes them to the cellar where the guild has set up shop. Natsu wants to crush Phantom Lord but Makarov tells him no. Since Phantom Lord attacked during the night, no one was at the guild and Makarov feels that since they did that, there is no reason to respond to the attack if that is all Phantom Lord can do. Besides, the Council forbids wars between guilds.
Lucy goes home and wonders why Phantom Lord would attack Fairy Tail. She had thought about joining Phantom Lord at one time but chose Fairy Tail instead. She gets home to find Natsu, Erza, Gray and Happy there. She is upset to find them in her home, but she is told that Makarov had suggested that they stay together in groups since Phantom Lord could attack them again. Natsu thinks that they could easily beat Phantom Lord, but Erza begs to differ and says that the Phantom Lord has its S-class wizards, the Element 4 and "Iron" Gajeel, a Dragon Slayer.
Levy, Jet, and Droy are walking along and Levy is staying with them since they are a team. They are attacked by a mysterious character.
The next day, Erza, Natsu, Gray, Lucy, and Happy see what the crowd of people are gathered for and they find Levy, Jet, and Droy attached to a tree with iron bands and they are badly beaten up. Makarov comes along and sees this and he declares war between the guilds.
Phantom Lord members are laughing about what happened to Fairy Tail and making jokes when suddenly Natsu bursts through their door and the rest of Fairy Tail comes in and a battle begins.
Lucy is going to the hospital to visit Levy, Jet, and Droy and watch over them. She runs into a strange sudden shower and then a woman walking through it. Then another strange man appears out of the ground. It's two of the S-Class wizards of Phantom Lord, Sol and Juvia. Sol tells Lucy that they were assigned to capture her and Juvia creates a water prison and Lucy loses consciousness.
Makarov leaves the main room to go upstairs and face the Phantom Lord guild master, Jose. After he leaves, Gajeel "the Iron Dragon Slayer," decides he wants to join the battle.