Yasako and Kyōko arrive by train to Daikoku City. Their virtual pet dog, Densuke, goes missing when he falls into an abandoned zone of cyberspace occupied by an illegal. Yasako enlists the aid of Fumie, a detective from the Coil Dennō Detective Agency, to help rescue her pet. In their efforts, they attract the attention of Searchmaton.
Yasako and Fumie ask Yasako's grandmother, Megabaa, to cure Densuke of a deadly illness. In return Yasako agrees to join Megabaa's Detective Agency as their eighth member. Meanwhile Isako relentlessly searches for the "Keyhole". Deducing that it resides as an illegal in Densuke, she unleashes her virtual pets to capture him.
Yasako and Fumie begin an investigation into Haraken and Searchmaton. They attempt to test and map out Searchmaton's behavioral patterns and programming. Under pressure, Haraken reveals to Yasako and Fumie his familial connections to the administrators of Searchmaton and his motive for investigating viruses and illegals.
The protagonists find a race of microscopic illegals growing on their faces. Yasako, utilizing a communication device devised by Megabaa, becomes heavily engaged in a god game-like relationship with the developing civilization. She attempts to use her divine influence to save the war-mongering race before it crumbles from a nuclear holocaust. In the wake of devastation, the illegals set out to find their "homeland".
For their research project, Haraken and Fumie find early records of dennō users who have passed out and reported hallucinations of "the other side". Meanwhile, Yasako spies on Isako as she visits her comatose brother. Deducing that he is 4423, Yasako confronts Isako with her realization that she has met her brother years ago.
With Kanna's glasses, Haraken sneaks out once again to the "other side" where he finally makes amends with a digital apparition of her. Yasako ventures in to the rescue with Isako and Tamako's help. It is revealed that Tamako was the first person to open the gate to the "other side", and the meaning of the show's title, Dennō Coil, is the phenomenon of the separation of one's dennō body from their physical body.
Yasako and Isako, on the run from Megamass and a powerful new searchmaton, take refuge in Megabaa's store. There, it is discovered that Densuke has the potential to open a stable portal to "the other side", now known as "Coil Domain". It is revealed that Coil Domain, Michiko, Imago and Kirabugs are remnants of an experiment gone awry, covered up by the Megamass conglomerate.