It is said that a very long time ago, the people of West Side Island used the Chaos Emeralds to advance their civilization and achieve prosperity. However, when those people tried to use the Emeralds for the wrong reasons, their prosperity vanished overnight. It is believed that the Gods sealed away the Emeralds within the island's depths.
In the present day, Sonic the Hedgehog was looking for new adventures following the events of the previous game when he discovered West Side Island. Sonic landed his personal plane, the Tornado, on the island to check it out and relax, not paying attention to the fact that a certain metallic flying object was chasing him and suspiciously landed on the other side of the island.
One day shortly afterward, Sonic noticed a shy orange fox tagging behind him, who nervously scurried back into the welcoming shade of the still palm trees when he was spotted. When Sonic was not looking, the peculiar fox barely managed to keep up with the blue hero. The fox's name was Miles Prower, though he was known as "Tails" due to his two special tails, which often made him the target of bullying. However, something changed in Tails when he saw Sonic come to the island, and he made up his mind that he wanted to be cool like Sonic. Realizing that the young kid was harmless and could actually keep up with him, Sonic allowed Tails to hang around as he freely explored the island.
On an early afternoon, Tails discovered a lone aircraft stranded at the beach. Being a budding fan of machinery and vehicles, he rushed to take a closer inspection. He was admiring its magnificent build until he noticed that Sonic was taking a nap under its wing. Realizing that Sonic owned the plane, Tails gently retreated to the other side of it to avoid waking him. Suddenly, an ominous flash occurred in the direction of the nearby forest, followed by a terrific explosion. The wild fire blew away various debris, which Tails avoided by taking cover underneath the Tornado as he witnessed robots violently excavating the area. This ceaseless activity threatened to blanket the entire island in its destructive flames.
It turned out that Dr. Robotnik detected the presence of all Chaos Emeralds after following Sonic, including the lost seventh one spoken of in the island's legend. He took the opportunity to kidnap the island's Animals to rebuild his Badnik forces and finish his ultimate weapon, the Death Egg. Robotnik now ruled the factories, refineries and cities. He's grabbed control of everything except the seven Chaos Emeralds. The speedy hedgehog went off into the forest to set things right and the curious fox followed.
Sonic and Tails journey through all zones of the game to chase down Robotnik. Eventually, Robotnik makes his retreat from the island. Sonic and Tails take to the skies of Sky Chase Zone as they pursue Robotnik's flying ship, Wing Fortress. The Tornado is shot down, taking its pilot with it. The player character (Sonic by default) takes on the fortress only to find Robotnik escaping again. However, his partner comes back with a hasty rocket engine repair. The player character jumps off the Tornado and onto Robotnik's escape vehicle, managing to enter the newly-created Death Egg Zone. He manages to defeat the final line of defense: Mecha Sonic and the Death Egg Robot. Just a moment later, the Death Egg explodes as the bright light could be seen above the West Side Island. The remaining pilot finds the player character with the Tornado in the middle of the sky and thus the island was freed.