The story of Final Fantasy VII is a long and convoluted one, and several parts were either cut or altered for audiences in North America and Europe. The following article is an attempt to construct for the reader the story of Final Fantasy VII based on a timeline of events.

The story effectively starts with an alien creature, called JENOVA, impacting the planet around two-thousand years before the events of the game itself. JENVOA is a parasitic organism that consumes the life-force of a planet before moving on to the next one. JENOVA is capable of reorganizing her DNA; this means that JENOVA has the ability to shape-shift. JENVOA's impact with the planet creates what becomes known as the Northern Crater, creating a "great wound" that the planet attempts to heal. The Cetra, also called the "Ancients", stop JENOVA before she can complete her ultimate goal, the destruction of the planet. However, they cannot kill her, and when Shinra discovers her some two-thousand years later, she is in what is effectively a state of suspended animation. Shinra recovers JENOVA, where a man named Professor Hojo becomes obsessed with a theory regarding her.

Hojo's theory is based on observations that the different "pieces" of JENOVA seem to be drawn to a singular destination. Hojo concludes that the different pieces of JENOVA will attempt to unify into a complete, singular being. Hojo's initial experiments of injecting test subjects with JENOVA's cells prove a dead end, as the test subjects invariably suffer extreme mental trauma, caused by JENOVA's ability to exert a form of mind control over subjects that have been injected with her cells. Trying a different approach, Hojo injected a large amount of JENOVA's cells into an as-of-yet unborn foetus that would later be named "Sephiroth". Hojo sold this project to Shinra under the guise of creating "Super-Soldiers", leading to the name "SOLDIER" being coined; this method of enhancing humans with JENOVA's cells was later rolled out to a greater number of test subjects, the most physically and mentally fit of what humanity had to offer. The presence of JENOVA's cells gave these soldiers the ability to process Mako energy, enhancing their abilities.

Meanwhile, Cloud Strife has grown up, and he attempts to enter the ranks of SOLDIER. His application is turned down, and Cloud instead becomes a regular member of the military police, causing him both shame and embarrassment at not being able to achieve his childhood dream. Cloud meets Zack Fair, a man who successfully applied to SOLDIER, and who was showered with Mako. Cloud idolizes him, and sees Zack as everything that he wanted to be. They are both sent to Cloud's home town, Nibelheim, on a mission, along with Sephiroth. JENOVA, now stored at Mt. Nibel's Mako Reactor for Hojo's super-soldier project, senses the approach of Sephiroth. Due to their close proximity, JENOVA begins to exert mental control over Sephiroth due to the presence of her cells within him; she implants in his mind the idea of going through the records of what he and JENOVA are, buried deep in the basement of the Shinra Mansion in Nibelheim. During the course of a single night, JENOVA crafts Sephiroth into a tool using mental manipulation of his emotions and thoughts, with the singular purpose of using him to deliver her to the Northern Crater to finish what she started: the destruction of the planet. Sephiroth is found by Cloud and Zack in the basement after they go looking for him; in the ensuing conversation, Sephiroth accuses them of being "traitors", and asserts that JENOVA is an Ancient, stating that he knows that he was infused with her cells before he was born, as part of an experiment carried out by Professor Hojo. He claims that JENOVA is the rightful heir to the planet, and starts referring to her as "Mother".

Sephiroth makes his way to the Mako Reactor at Mt. Nibel, where Cloud and Zack confront him. Sephiroth frees JENOVA; shortly after, Cloud stabs Sephiroth in the back, and decapitates JENOVA. Both Sephiroth and the head of JENOVA fall into the lifestream, where they drift to the Northern Crater; along the way, JENOVA attaches herself to Sephiroth like a parasite, using him to sustain herself. Because of this parasitical relationship, the lifestream is unable to absorb Sephiroth's life force. Shinra captures both Cloud and Zack, and sends the headless remains of JENOVA to the Shinra Building in Midgar. Cloud and Zack are both given large doses of JENOVA's cells; Zack dies, and Cloud's mind is shattered by the procedure. By the time that Cloud meets up with Tifa in Sector 7, Cloud's mind has attempted to heal itself, but instead of using his own memories, his brain creates false ones centered around Zack's experiences and memories. Cloud now believes that he was in SOLDIER, and achieved First Class. At Tifa's insistence, Cloud, after having already helped them to bomb the Sector 8 Mako Reactor, agrees to team up with AVALANCHE once more. Thus begins the story of Final Fantasy VII.