From a small yokai whose name he has recently reclaimed, Takashi Natsume embarks on a journey to a town where his late grandmother, Sanae Kobayashi, who was an exorcist, once spent some time. As Natsume explores the area, he encounters Yorie Tsumura, an acquaintance of his grandmother, who introduces him to her grown son, Kengo Kora. Meanwhile, Nyanko-Sensei, a spirit in the form of a cat, finds himself trailing some pesky spirits into the woods. This leads to a curious mishap where he becomes entangled with a peculiar seed that eventually grows into a spirit tree right outside Natsume's home.
The following day, the tree's mystical energy causes Nyanko-Sensei to split into three distinct forms, leaving him nearly unintelligible. As Natsume heads off to school, he entrusts the three amusing feline "triplets" to "the Dog Circle." However, one of them decides to wander off and crosses paths with Tooru Taki, who happily takes the adventurous spirit in.
During this time, Natsume reconnects with Kaname Tanuma, who aids him in searching for the wayward Master-Kitty Cat triplet. They soon encounter Miyuki Sawashiro, also known as Mukoko, who reveals a shocking truth about the presence of the Sacred Tree: he is a formidable daiyokai who has taken on the appearance of Mokou, who died in a mountain accident eight years prior. This revelation disturbs Natsume deeply, prompting him to seek a way for Mukoko to bid farewell so that Yorie does not feel entirely alone. Mukoko reassures him that Yorie will soon forget his interference in her solitary existence, as will Tanuma and Taki.
The situation becomes more complex when Shuichi Natori, a self-taught exorcist and movie star, returns from filming, intent on locating a rampaging yokai associated with the death of his master, known only as "the Elder." As he crosses paths with Natsume, he reveals his intent to destroy the memory-erasing yokai. Though concerned, Natsume encourages his friend that everything will ultimately work out.
As Natori prepares the incantation to free the yokai from its supernatural contract, Mukoko requests Natsume to restore his original name. Upon doing so, a being known as Honokage shares how he encountered Natsume Reiko in his true form, informing Natsume of her desire to be forgotten after her passing. Once Nyanko-Sensei returns to his normal state, he assists in subduing the yokai, allowing Natori to release it, which subsequently reverts to its smaller, more benign form.
As the Sacred Tree begins to dissolve, Honokage implores Natsume to keep an eye on Yorie. With small orbs of yellow spiritual light enveloping the town, most residents lose their memories, leaving only Natsume and Nyanko-Sensei untouched due to their immense spiritual and demonic powers. In a touching moment, Natsume returns a bell that Yorie had lost many years prior, a keepsake that Reiko had cared for. During their farewell, Yorie shares a paper-cutting silhouette of Reiko, revealing how she and her middle-school friends secretly admired Natsume Reiko from a distance, yearning for something extraordinary in their mundane lives. She confides that she feels a connection to Reiko, believing she can glimpse a part of her through the etching.
As Natsume departs at a train station, he shares a final exchange with Yuki, who admits that he had fabricated tales of his own ability to perceive the spiritual world, as he merely desired to understand Natsume's unique perspective. The two say their farewells, with Natsume promising to continue returning names from his grandmother's Book of Friends. Nyanko-Sensei humorously vows to consume Natsume when that time comes, but for now, they both anticipate the paths that their destinies hold.
