In Rivendell, representatives from different parts of Middle-earth gather to decide what to do with the One Ring. Elves, Dwarves, Men, and others have come because they recognize that Sauron is growing stronger, and the Ring cannot be left to fall into the wrong hands. At the Council of Elrond, the full history of the Ring is discussed, including how it came to Bilbo, and why it is so dangerous.

Many suggestions are made—some want to use the Ring as a weapon against Sauron, while others warn that it would only lead to corruption. In the end, Elrond makes it clear: the Ring must be destroyed. But it can only be destroyed in the fires of Mount Doom, where it was originally forged.

Frodo volunteers to take the Ring to Mordor. His decision surprises many, but his courage is respected. A group of companions is chosen to protect and assist him. This group becomes known as the Fellowship of the Ring. It includes Frodo and three other hobbits (Sam, Merry, and Pippin), Aragorn the Ranger, Boromir from Gondor, Legolas the Elf, Gimli the Dwarf, and Gandalf the Grey.

They set out from Rivendell and head south. Their journey is difficult and cold as they attempt to cross the Misty Mountains, but heavy snow forces them to turn back. Gandalf decides they must go through the ancient dwarven mines of Moria, despite the risks.

In Moria, they discover the remains of a lost dwarven colony. The mines are dark, abandoned, and full of danger. The group is eventually attacked by orcs and pursued through the tunnels. In the deepest part of Moria, they encounter a terrible creature from the ancient world—a Balrog, a being of flame and shadow.

To protect the others, Gandalf stays behind on the Bridge of Khazad-dûm and confronts the Balrog. He defeats it but is pulled down into the depths. The Fellowship escapes, but they are devastated by the loss of their guide and friend.

Without Gandalf, the group is shaken, but they continue forward, now led by Aragorn. Their next destination is the forest of Lothlórien, home to the Elves, where they hope to find rest and guidance for the journey ahead.