Operation Stardust begins during the battle of A Bao A Qu, the last battle of the bloody one-year war. The Duchy of Zeon forces fight bravely against the Federation forces, but the war is becoming a lost cause. As if that wasn't bad enough, the Zeon leader Giren Zabi is killed. Realizing this, Zeon Colonel Auguille Delaz, believes it would be pointless to continue fighting and advises his troops to retreat and fight again another day. He is met with some resistance from his ace pilot, Anavel "Nightmare of Solomon" Gato, but he manages to convince Gato to stand down.
The One-Year War has ended. The Earth Federation forces rebuild their somewhat wrecked war machine, along with developing new Gundams. In association with Anaheim Electronics, They built the Gundam RX-78GP-01 "Zephyranthes" and the RX-78GP-02A "Physalis". The GP-02, however is a very risky move because it has the capability to deliver a nuclear mortar (A big Antarctic Treaty no-no). Regardless the two Gundams arrive at Torrington base in Australia aboard the assault carrier Albion. There, we first meet Ensign Kou Uraki, a test pilot at the Torrington base. He and his best friend Keith get aboard the Albion to check out the new Gundams, but are chased away by head engineer Nina Purpleton. Meanwhile, an Anaheim employee manages to sneak Anavel Gato into the base. Dressed as a Federation officer, he manages to get inside the Albion and steal the GP-02A. Once he captures it, he commands his back up units to attack the base, catching the Federation be caught totally by surprise. During the chaos, Kou commandeers the GP-01 and goes one-on-one with Gato. Their duel is interrupted and Gato escapes with his men and the GP-02A. Kou, along with Keith and their commander South Burning, Chase after him and manage to foil Gato's first attempt to get into space, but Gato manages to escape with the GP-02 thanks to a Zeon submarine.
Kou and company heads back to Torrington, which is in shambles. South Burning was injured and two of Kou's fellow test pilots were killed. Meanwhile, the Albion takes the responsibility of getting the GP-02A back. Kou and Keith become part of the Albion's MS team, along with South (who is still recovering form his injuries). They get more pilots too, three former comrades of South: Chap Adel, Alpha Bate, and Bernard Monsha. Also, they get a GM Cannon and a couple of GM Custom mobile suits along with the GP-01. The somewhat arrogant (but amusing) Monsha, scoffs at the fact that Kou is the pilot of the GP-01 and challenges him to a duel. They square off in some ruins with Kou in is GP-01 and Monsha in the GM Custom, While Nina, Keith, and Mora watch on. Kou manages to beat him, however, South catches them and both Kou and Monsha are sent to the brig for insubordination.
Fortunately the two are released when they reach Africa to search for Gato. When the cover of the Anaheim spy (the one that assisted Gato) is blown, he steals a core fighter and high tails it to the secret base. Realizing their cover is blown, the Zeon shoot down his fighter and head off to keep the incoming Federation forces occupied. Gato prepares the GP-02A for liftoff in an old HLV (Heavy Lift Vehicle, a space shuttle), while Kou, Monsha, and Keith are held at bay. They manage to eventually break through the lines, but it is too late. Gato has launched into space to join the Delaz fleet.
Gato and the GP-02A assemble with the Delaz fleet at what used to be Side 5. There, Gato is shocked to discover that Delaz has chose to have ex-Zeon marine Cima Garahau and her fleet assist him. Despite Gato's distrust for her, Delaz feels her assistance would be helpful. Delaz then goes on TV and declares war against the Earth Federation, also showing off their captured GP-02A. The Albion then shows up at Side 5, but is attacked by Cima's forces. The Albion's escort ships are destroyed during the melee and if that's not bad enough, Kou's GP-01 is badly damaged from his encounter with Cima herself.
After getting their tail kicked pretty bad on the last mission, the Albion heads to port at the Moon city of Von Braun City. There, the team is put on temporary shore leave while the Albion and it's MS troops are repaired, and the GP-01 gets it's space full burner upgrade. During his time on Von Braun City, Kou is in regret over his loss to Cima and getting the GP-01 damaged. During his stroll by himself he is attacked by a gang of street thugs. He is saved however, by an one-armed man named Kelly Layzner. Kou uncovers that Kelly is an ex-Zeon MS pilot and is secretly rebuilding a mobile armor in his junkyard (The mobile armor can be piloted with one hand). Kou assists Kelly in rebuilding it, which helps Kou get his confidence back. Later, the GP-01FB is completed and just as Kou hears the news, Kelly attacks in his Val Varo mobile armor. Enraged that Delaz would not accept the handicapped ex-soldier into his fleet, Kelly decides to challenge the Gundam to prove he can still do it or die trying. Kou goes out to encounter Kelly, and a fierce battle ensues. Kelly is killed by Kou in his GP-01FB, afterwards Kou finally has the courage to tell Nina his true feelings.
Now that all of the repairs to the Albion are complete, the team heads out to Kompei Island. Before they arrive, the Albion clashes with Cima's fleet again. During the battle, South Burning comes upon a discovery of a briefcase in one of the wrecked ships. He retrieves it, but then is attacked by Cima. He manages to get away, but his GM Custom is badly damaged. When he reunites with the others, he begins to tell them about the documents inside the briefcase. Unfortunately, before he could get into details, his GM Custom explodes. The Albion and team arrive at Kompei, where a massive Naval review is given and the Federation ships are all lined up. A perfect time to attack. Gato arrives at the scene with the GP-02A's Nuke Bazooka deployed. He fires, destroying a good portion Federation ships. Kou notices Gato and the two resumes their duel. During the fight, both the GP-01FB and GP-02A are destroyed. When both pilots exit out of their hatch they both get a good look at each other, face to face.
Now, Operation Stardust kicks into high gear. Cima and her fleet send a newly constructed colony directly to smash into the moon. The Federation takes its remaining ships from to pursue the runaway colony. Meanwhile, the Albion docks with the Anaheim space station La Vie En Rose to obtain the new GP-03 "Dendrobium" Gundam. Unfortunately the Federation forces guarding the station will not let the Albion take the new Gundam. However, with the assistance of Anaheim engineer Lucette Audevie, Kou manages to take the GP-03. Lucette loses her life in the process, but before she dies, she tells Kou about a dark secret regarding Nina. After the Albion's crew manages to stop the occupying Federation forces from attacking Kou and the new Gundam, they make their way to the center of the colony conflict.
Elsewhere, Gato gets hardware upgrade as well. During a meeting with "neutral" Zeon officials, they give him a new mobile armor called the Neue Zeil ("New Goal"). They immediately head out to wreak havoc on the pursuing Federation fleet. As the Colony approached the moon, Delaz gives the signal to his cohort on the moon to activate the moon's laser launching system to fire the colony's rocket boosters, thus moving out of collision with the moon. This cohort is none other then an Anaheim Electronics executive director O'Sullivan. This move not only stops it from colliding but sends it around the moon and directly towards Earth. Now, the Federation's fleet has run out of propellant, no longer able to chase the colony as it heads right for the Earth.
All seems lost for the Earth Federation, however, the Albion has arrived. The Albion and the new GP-03 attempt to stop the colony. Gato and the Delaz fleet strikes back at the Albion and the remaining fleet. During the melee a group of Federation ships, led by Jamitov Heimann, assemble by a giant Solar System Mirror array located near the Earth. During all of this, Cima shows her true colors and back stabs Delaz. She reveals she is part of the Federation at the Solar Array, and orders a cease-fire while she has her gun pointed at Delaz's head. Delaz is not phased by the recent events and urges Gato to continue on. This enrages Cima and she pulls the trigger. Gato, angered by Delaz's death, smashes the bridge of his ship. Cima narrowly escapes, and high tails it back to the Solar Array forces. Gato does not pursue her but instead heads directly to the Solar Array to stop it from destroying the colony. Cima, later has a run in with Kou and the GP-03, and is killed by the GP-03's massive mega beam cannon. Meanwhile, the Solar Array fires on the colony. Unfortunately it is not able to destroy it when Gato manages to destroy the command module of the Array.
During the chaos, The Albion manages to hold it's own against the Delaz fleet. In an unexpected twist, Nina steals one of the core fighters and heads out to find Gato. Gato has entered the colony to make some final coarse corrections when Nina shows up. She begs him to stop with tears in her eyes, aiming her gun right at him. Gato continues what he was doing, and is shot. But not by Nina, but by Kou Uraki Kou is about to finish him off but Nina stops him. Her and Gato escape, while a frustrated Kou shakes his head. Nina continues to ask Gato to stop but he just knocks her out and places her back in her core fighter. As they exit the colony he hands over the core fighter's cockpit to his friend Karius to take back to the Neutral Zeon fleet. Gato then waits for Kou to exit the colony, as soon as he does, their duel continues. Kou is suffering a heavy beating by the hands of Gato's Neue Zeil. However, before Gato can finish him off the Solar Array fires again, enveloping both machines in the bright light. When it all clears, Kou is still alive, but Gato is nowhere to be found. His Gundam exits out of its External Booster/Weapon attachments and grabs its rifle. Frustrated by the turn of events Kou fires wildly into space. Meanwhile, Gato's heavily damaged Neue Zeil is floating in space. He encourages the remaining troops to follow him in a break for the Neutral Zeon fleet. However, the Federation fleet opens fire on them and Gato kamikazes into a Federation Destroyer's bridge. Back on Earth, it is later realized that the target was not Jabrow base in South America but the Midwest United States, the Earth's main food source.
In the aftermath, Director O'Sullivan commits suicide then face prosecution of his crimes. A trial begins and Kou Uraki is found guilty of Insubordination. He is sentenced to 1 year of hard labor. Meanwhile, Heimann begins the infamous "Titans" to deal with any new rises in pro-Zeon activity. Later on, the records of the experimental Gundams were deleted and Kou was set free as a result. He arrives at a new North American base were he sees his old friend Keith again. As he runs aside of Keith's Gelgoog Marine, he notices a jeep sitting outside the fence of the gate. In it sits Mora and Nina, who is waving and smiles back at Kou.