The series focuses on two major characters, in two different plot arcs, who find themselves caught up in a series of mysteries involving so-called "material fairies" and "material evils". While they are dealing with these paranormal entities, life continues around them as their friends deal with the ups and downs of life.
The plot centers around two major arcs in the storyline, the first involving Ayumu Aizawa, who is visiting his father in the small town of Tana during the summer; the second concerning Kisa Tanigawa in Yokohama, a year and a half after the events of the first arc.
The first twelve episodes of the series focus on the day-to-day life of Ayumu Aizawa as he visits his father, a veterinarian, at a small town in the countryside. Ayumu has spent his visit thus far aimlessly biking across the valley, but a chance meeting with a girl named Miku sends him searching for a long-lost friend of his, Wakkun. Upon finding Wakkun, he discovers that the boy has not aged since he and Ayumu played as children. Wakkun is also wearing clothes very similar to the raincoat and galoshes that Ayumu wore habitually as a child. Wakkun introduces Ayumu to his two friends, Dosshiru (Doss) and Shisshin (Sense), mysterious flying objects that alternate between a mechanical form and a sphere of yellow light.
These lights seem to be invisible to most of the people in town, but appear in reflections in people and animals' eyes. A local reporter, Akira Sukawara, shows up, attracted by reports of kappa and other mysterious events. She follows the animals, notably a cat one of the local boys saw fighting a kappa, to the yellow lights, and grills a reluctant Ayumu for information. Unable to remember the summer he spent in Tana as a child, Ayumu, with the help of Miku and several other people from Tana, tries to understand what happened when he was a child, and the mysterious connection between him, Wakkun, Dosshiru, and Shisshin...
One and a half years later, Kisa Tanigawa, a depressed high school student, routinely skips class. One evening, wandering aimlessly around the city, she stumbles upon another mysterious mechanical object. Naming it "Bun-chan" or "Ping" in the English dub, after the sound it makes, she takes it home and treats it as a pet. When she tries building a fish out of old scraps of metal, the top fin of the fish does not stay, so Bun-chan (Ping) helps glue it on. Meanwhile, Sukawara reappears, now trying to prove the existence of the mysterious objects that appeared at the Cat Dance in Tana a year and half ago, which she terms "material fairies", and hears about Bun-chan. Upon witnessing a meeting between Kisa and Ayumu, she calls Bun-chan not a material fairy, but a "material evil", as its outward appearance does not resemble those of the material fairies spotted in Tana. The material fairies and the material evils, however, seem to be at war with each other. When the three meet, Dosshiru, Shisshin and Bun-chan. Dosshiru and Shisshin start chasing Bun-chan and soon destroy it, leaving Kisa very upset that Bun-chan is gone. After a while the connection of Kisa's fish's metal fin starts glowing. One night the fish turns into a sprite form of Bun-chan. Kisa then decides to name it Po-chan.
The city's population becomes increasingly aware of the situation, as pictures of the material evils, spheres of blue light, circulate among cell-phone users, accompanied by rumors that they bring good luck. Murals appear urging people to think and trust themselves. Eventually, a giant spiral, resembling the metal construction of the material evils, appears in the sky, and the police evacuate a section of the city. Some of the same phenomena are present as in Tana, such as the failure of electronic devices.