Led by Selvaria, the Imperials continue to press the attack, repeatedly destroying the Gallian forces. Not even Squad 7 is able to stop her. Meanwhile, back in the camp, a desperate Faldio takes Princess Cordelia hostage and seizes her Ragnite shield and lance. He reveals Alicia's Valkyria ancestry to Cordelia and tries to wake Alicia, but has limited success. It is only when Welkin's desperate call for retreat over the radio is heard that Alicia begins to react. Taking Cordelia's shield and lance, Alicia faces Selvaria on the battlefield. She defeats Selvaria and begins attacking the Imperial forces, destroying the Batomys in the process. Caught off guard by the appearance of a Valkyria on the Gallian side, Jaeger orders all Imperial forces to retreat. Selvaria rescues Maximilian from the ruined Batomys and withdraws from the battle. As the Gallians celebrate their unexpected victory, Welkins runs toward Alicia as she suddenly falls unconscious.

Inside the Marmotah, Squad 7 engages the Imperials to allow Faldio and Welkin to search for Alicia. Faldio is shot protecting Welkin and sacrifices himself with a grenade to hold off the Imperials. Alicia is brought in front of Maximilian and he tries to convince her to join him but Alicia calls him a pathetic fool. When Welkin finds Alicia tied up on the deck of the Marmota, Maximilian attacks him using the Artificial Valkyrian System drawing power from the Holy Lance. He frees Alicia and challenges her and Welkin to a duel to demonstrate the power of his superior technology. Alicia regains her strength and unleashes her Valkyrian flame which overloads the system and injures Maximilian. Refusing to surrender, Maximilian hurls himself to his death and the Marmotah beings to collapse. Alicia pleads Welkin to leave her because she feels she can no longer can control the burning Valkyrian flame. However, Welkin embraces and kisses her, extinguishing the flame. After the battle, the Empire and Gallia sign a peace treaty, ending the seven month Gallian War. Princess Cordelia is cheered by the citizens of Gallian in her coronation as Archduchess despite her Darcsen heritage being revealed. With the Miltia disbanded, all of the members of Squad 7 go their separate ways. Welkin and Alicia return to Bruhl, promising to live and honor the memories of those that died in the war.

The Gallian Militia receives new orders to attack the Imperial fortifications at the Mulberry Coast. However, due to the terrain, the only possible direction of attack is along the shoreline, which is completely exposed to the base's formidable defenses. Worse, the attack is scheduled to take place at the same time as the Holy Spirit Festival, a holiday that all Gallians celebrate. Squad 7 makes the best of the situation, and still manages to celebrate as the everyone give gifts to each other. Isara gives Rosie a handcrafted good luck charm doll, which Rosie accepts. Later, Isara manages to manufacture smoke shells for the Edelweiss to give Squad 7 a chance. During the attack, the smoke obscures the defender's line of sight and allows Squad 7 to breach the defenses. Emboldened by the Militia's success, the Regular Army finally joins the fight and forces the Imperials to retreat. Rosie is saved from being killed by a sniper thanks to the good luck charm from Isara. As the battle ends, her attitude with Isara begins to soften as she begins to view her more as a friend. As they converse, Isara is shot and killed by an Imperial sniper, much to Rosie's shock.

The Gallian and Imperial forces battle each other in the streets of Randgriz. However, Maximllian is able to seize the Holy Lance of the Valkyrur, a massive Ragnite weapon which was hidden inside the structure of Randgriz Palace, and equip it as the main cannon of the Marmotah. After demonstrating the power of the lance by demolishing a hill, Maximlian calls on the Gallians to surrender or be destroyed. Jaegar confronts Maximilian about his lust for power, but Maximilian replies that power is the only thing one needs. He also states Jaegar that he executed Karl for standing in his way, and threatens Jaegar with the same fate if Jaegar proves disloyal. Marmotah then tries to fire on Randgriz, but is stopped by Alicia, who survived the explosion at Ghirlandio. Seriously weakened from her battle with Selvaria, Alicia faints after blocking a second shot, and is captured by the Imperials. Jaegar declares he will no longer serve Maxmillian and is shot. Welkin, Faldio and Squad 7 storm the Marmotah in an effort to save Alicia.

Welkin and Alicia immerse themselves in their work in order to avoid the issue of their relationship. The rest of Squad 7 are aware of this, but are unable to do anything about it. Captain Varrot then informs Welkin that Squad 7 is tasked with liberating Bruhl, in an effort to raise Squad 7's morale. Zaka then arrives at the base and announces that he will be the new driver for the Edelweiss. Meanwhile, as Welkin packs Isara's belongings, he begins to have flashbacks of his sister. After doing some research and piecing together clues he had witnessed earlier, Faldio is covinced Alicia is a Valkyria. Squad 7 assaults Bruhl and quickly forces the Imperial garrison to surrender, liberating the town. Alicia finds Welkin at his old house, where he admits that Isara's death has been tearing him apart and he has been grieving since her death, yet he cannot find it in himself to cry. Alicia comforts Welkin by telling him he no longer needs to hold back his tears.

Captain Varrot instructs all Squad leaders to take a break following the Fouzen operation to recuperate and restore morale. When Rosie is asked by Squad 7 to represent them in a talent contest, she refuses to do so and storms out in anger. When she meets Isara, Rosie tells her that armed Darcsen guerrillas came to take shelter in her home during the First Europan War to hide from Imperial soldiers when she was a child. Rosie's parents were killed by the guerrillas in the crossfire when they wrongly accused her father of betraying their location to Imperials. Despite what had happened, Rosie is traumatized by her past and still doesn't want to sing. Welkin decides to try persuading her himself after hearing what Isara had told him that she would avoid being present in the talent show to get Rosie to participate. Faldio later returns back to the barracks with Isara in tow; Rosie had performed even with Isara present as an order from Faldio. Her performance cheers the militia personnel. After the concert, Faldio tells Alicia that he loves her.

Alicia and Selvaria meet for a final showdown. As they battle, they both recognize each other from the Imperial lab where they were held as children. Selvaria, being considered the most powerful, was kept at the lab while the rest of the orphans including Alicia were sent away to foster families but Selvaria managed to escape and met Maximilian. During the battle, Selvaria, fighting for Maximilian, begins to gain ground on Alicia. Nearly defeated, Alicia suddenly realizes that she has something precious to fight for as well: Squad 7 and Welkin. With renewed strength, Alicia defeats Selvaria with one last strike. Selvaria understands that defeated she is of no use to Maximilian, and sacrifices herself to create a massive explosion, destroying the Gallian Regular Army and General Damon. Meanwhile, Maximilian attempts to negotiate a peace treaty with Cordelia, demanding she marry him so that he has access to the Valkyrur bloodline, but Cordelia reveals that she is in fact a Darcsen. Shocked, Maximilian orders the Marmotah to attack Randgriz. Karl then confronts Maximilian about his callousness towards the loss of Selvaria which he shoots Karl dead, declaring no one will stand in his way.

Maximillian announces to the Drei Stern that the Emperor intends to remove him from command of the invasion force and with only one month until his removal, Maximillian decides to mobilize all of his forces and force Gallia into a decisive battle at the Naggiar Plains. Meanwhile in Randgriz, Ramal tries to deal with Zaka replacing Isara, and finds comfort in Faldio's advice. Soon, the Gallians face Maximillian's onslaught, led by his massive personal tank, the Batomys. Favoring his Regular Army, Damon orders Squad 7 to play a support role and stay away from the front. Princess Cordelia soon arrives after the first battle with a Ragnite shield and lance in hand; her presence inspires raising morale among the Gallians. With renewed vigor, the Gallians force the Imperials back. Maximillian orders Selvaria, armed with Ragnite weapons, to retaliate. She destroys the entire Gallian forces on the front, including Squad 1 which Ramal sacrifices himself to save Faldio, much to his shock. With Faldio as the only survivor, Alicia tries to comfort him, but the traumatized Faldio shoots her in the back.

Alicia and Welkin undertake deep reconnaissance in territory held by the Imperials but are forced to take shelter in an abandoned cabin after a freak snowstorm comes. During the night, a single Imperial soldier enters the cabin and threatens use a live frag grenade to force them to surrender. Alicia, however, is able to convince the soldier to lower his weapon so she can treat his gunshot wounds. Meanwhile, everyone in Squad 7 begins to feel worried as Alicia and Welkin have not returned from the reconnaissance. At the cabin, the wounded soldier explains that he joined the Imperial army to have a better life but grew disillusioned and was shot by his comrades while attempting to desert. Moved by Alicia's compassion, he re-inserts the safety pin in his grenade, rendering it inert. Before the soldier passes away, he tells them his name, Mikhail Weber. Alicia and Welkin reunite with Squad 7 after giving Mikhail a burial.

With ulterior motives in mind, Imperial Central Command dispatches three aides to serve the Generals. Karl Oswald, aide to Selvaria, finds his new commander intimidating and cold towards him. Meanwhile, Prince Maximilian is summoned back to the Imperial Capitol alone, much to Selvaria's chagrin. Sensing a plot behind Maximilian's recall and the three aides' sudden appearance, Jaegar suggests that Selvaria should act according to her instincts. However, Selvaria's initial attempt to go after the Prince is thwarted by Karl's insistence on following regulations. An assassin from the Capital attempts to murder Karl; Selvaria dispatches the assassin, and Karl confesses that he was sent to prevent Selvaria from accompanying Maximilian to the Capital. He proceeds to redeem himself by driving Selvaria and Jaegar to catch up with the Prince, where he subsequently witnesses Selvaria in action against assassins sent against Maximilian, and also discovers the reason behind her nickname, the "Azure Witch". Maximilian survives the attack unharmed, much to his older brother, the Crown Prince's consternation. Karl is relieved that Selvaria accepts him as her aide.

After Faldio accuses Selvaria, Karl and Jaeger of staging the kidnapping, they realize that the Atlantic Federation is behind the abduction. Welkin, Faldio and Ramal are forced to work together with the Imperial officers to rescue Alicia and Cordelia before they are moved into Atlantic Federation territory. Welkin and Isara in the Edelweiss team up with Faldio and Ramal and are successful in rescuing Alicia and Princess Cordelia from Federation agents. Irene, who is in hiding, realizes that the disappearance of Cordelia is the apparent work of Borg and Federation Ambassador Townsend. Cordelia, in a meeting with Faldio and Welkin, orders news of her abduction kept secret from the Gallian media since she wants to keep the affair from going public. Irene warns Alicia, Isara and Ramal of a deeper conspiracy at work.

With Alicia on their side, the Gallian Regular Army scores numerous victories over the Imperials until they are pushed to their final stronghold in Gallia: Ghirlandio. Knowing his failures will be exploited by the Emperor and the Crown Prince, Maximilian declares that he is no longer the Second Crown Prince of the Empire, but the Emperor of his own nation that he will create. Selvaria is still troubled by her failure at Naggiar, but still believes in Maximilian out of devotion and love. Meanwhile, at the Gallian camp, Welkin and Squad 7 are trying to contact Alicia, but are stopped by Regular Army officers. Squad 7 attempts to force the issue, but instead cause a brawl. Cordelia pardons Faldio, and then meets Alicia where Alicia requests that Cordelia ensure the safety of Squad 7 and Faldio until the end of the war. To fulfill her promise to Alicia, Cordelia requests Squad 7 to stay behind to be her personal guard. Alicia and the Gallian Regular Army travel to Ghirlandio, where they advance against Selvaria and the Imperials.

Welkin and Squad 7 team up with Faldio and Squad 1 to attack the heavily defended Kloden supply base, held by General Gregor. When Rosie captures a porcavian pig, leading to the discovery of an animal trail, Welkin proposes using the Edelweiss and Squad 7 led by Rosie and Largo to distract the main Imperial force while Alicia and Squad 7 sneak into the base from the side using the animal trail, much to Alicia's dismay as she is not fond of Faldio. Advancing aggressively, Alicia is shot during the operation, but Faldio is able to help her to safety. However, she soon resumes fighting as she healed fast, much to the amazement of Faldio. The Gallian attack proves irresistible and Jaegar arrives with Imperial reinforcements to assist the reluctant Gregor in escaping. The Militia soon captures the base, but Welkin has to restrain Faldio from pursuing the retreating Imperials. After the battle, Alicia decides to keep the porcavian pig and names it Hans.

Under threat of an approaching Imperial invasion, the inhabitants of Bruhl are forced to evacuate under the protection and assistance of the Bruhl Townwatch. Alicia, a member of the Townwatch, arrests Welkin Gunther at gunpoint on suspicion of espionage, despite his protestations of innocence. Welkin manages to escape and Alicia gives chase, still convinced that he is an Imperial spy. During the chase, both of them are spotted by Imperial scouts and fired upon. The two retreat to the safety of the Gunther estate in the Bruhl countryside, where they meet up with Welkin's Darcsen foster-sister Isara. Imperial troops and tanks arrive and surround the estate.

General Damon orders the deployment of Gallian militia to Fouzen out of his irritation for their growing popularity with the Gallian people and their success against the Imperials. While some of the Gallian Militia attack Fouzen by launching a diversionary tank assault, Welkin and Faldio lead their units in civilian clothes in order to covertly make contact with a Darcsen resistance group led by Zaka. After arriving in Fouzen, Rosie tells Zaka of her clear dislike to the Darcsen people because of their history. Despite this, Zaka tells Rosie that he understands her anger as he and that his fellow Darcsens had become used to anti-Darcsen discrimination a long time ago. Welkin, Faldio and Zaka proceed to make preparations to destroy General Gregor's armored train known as the "Equus", while simultaneously attacking the Imperial military Headquarters and Darcsen concentration camps in Fouzen.

The Gallian militiamen, led by Welkin and Faldio, and the Darcsen guerrillas led by Zaka began to assault Imperial positions in Fouzen. Although there was some initial success in overwhelming Imperial forces and rescuing the Darcsen prisoners, Gregor and the Equus, as well as some surviving Imperial soldiers and tanks, are able to mobilize to rout the invasion attempt. When the Equus is lightly damaged by planted explosives at the railway tracks, Gregor issues an ultimatum for the Gallians to withdraw from Fouzen or face the death of innocent Darcsens at their hands. When Faldio issues the order to attack, the Equus fires its cannon at the Darcsens. Isara and Ramal, who are in a hijacked Imperial tank, attack the Equus and eventually destroy it. Even though the operation was a success, the militiamen and the guerrillas' morale is down due to the deaths of the Darcsens civilians, killed by anti-personnel munitions. Rosie is traumatized, remembering the deaths of her parents at the hands of heavily armed gunmen years ago as a child.

Alicia is kept isolated from Squad 7 by the Gallian Regular Army, while Damon decides to transfer her to the Regular Army and exploit her Valkyria powers for his own glory. Welkins confronts Faldio over shooting of Alicia, with Faldio replying that he had no other choice or Gallia would have lost. Meanwhile, Selvaria fumes over her failure to protect Maximilian, while the Imperial Prince is determined to continue the invasion despite the loss at Naggiar. He still has a trump card in the form of a massive armored vehicle, the Marmotah. At the Gallian camp, Alicia escapes and tries to reunite with Squad 7 when Damon declares she will be promoted to Captain and be forcibly transfered. The members of Squad 7 fear Alicia and her newly awakend Valkyrur powers, but she inadvertently hears their conversation. In the midst of the confusion and misunderstanding that follows, Alicia accepts the view that she is now unwelcome. In tears, she decides to accept the transfer to the Regular Army, despite Welkin's pleas.

Faldio attempts to socialize with Alicia with mixed results. Despite Squad 7's success in capturing the Vasel Bridge, General Damon of the Gallian Regular Army remain disdainful of the Militia forces, and chose to omit Squad 7 in the assault on Kloden base, leading to widespread resentment from the Militia. Alicia was troubled by Welkin's quiet acceptance of the omission, but Faldio seizes the chance to encourage her to have more faith in Welkin. Damon was subsequently defeated by General Gregor of the Imperial Army. Squad 7 was subsequently chosen to attack Kloden, with support from Faldio's Squad 1. Thanks to Faldio's provocation, a mortified Alicia ended up slapping Welkin by accident.

Welkin and Alicia are invited to attend an award ceremony at the Royal Palace with Faldio, Ramal and Isara back at Randgriz. Meanwhile, Selvaria and Jaeger infiltrate the ceremony under the guise of a rich couple from overseas. During the banquet, Faldio and Welkin are receive commendations from Princess Cordelia for their action in taking back Vasel and Kloden from the Imperial forces. Jaegar encounters Alicia outside the banquet hall, giving her a friendly warning. Alicia informs Welkin and Faldio of the presence of the Imperials Generals in the Royal Palace. After Cordelia returns to her quarters to rest, she is mysteriously abducted by an unknown assailant. When Alicia gets lost in the castle, she sees Cordelia being kidnapped but is knocked unconscious and gets kidnapped as well on Prime Minister Maurits von Borg's orders.

Welkin and Squad 7 pay their respects to Isara at her funeral. For her role in the Mulberry Coast victory, the Gallian military posthumously awards her the rank of Master Sergeant. Welkin orders Squad 7 to quickly move on and focus on dealing with the Imperials despite their grief which Ramal accuses Welkin of not caring about his sister's death. Rosie suffers from Survivor guilt in not being able to save Isara. General Damon demands Welkin give him the details on making the smoke shells in three days or be punished. Alicia later discovers that the rest of Squad 7, angered at Damon's actions, plan to ambush him with a hidden hole on the ground to trap him. However, Faldio manages to convince them otherwise, saying that the best way to humiliate people like Damon is keep winning battles and save Gallia. Faldio confronts Welkin about his refusal to deal with the death of Isara and Alicia's feelings, prompting Faldio to punch him.

In the militia, Welkin gets assigned command of his own squad, number 7, and his request for the Edelweiss and Isara to join him is approved. To her surprise, Alicia is placed under his command as a non-commissioned officer, and the two run into Faldio, one of Welkin’s university friends.

Using the tank from the barn, Isara, Alicia, and Welkin break out through the enemy line, and reunite with the Town Watch in Bruhl. Alicia tells the Town Watch they need to hold out against the Imperial Army until the regular Gallia military arrives.

When Faldio accuses the Imperials of trespassing on Gallian territory, Maximilian concedes the fact, but points out that the place belongs to the Valkyrur, namely Selvaria. When Maximilian attempts to walk away, Alicia threatens to shoot, but Selvaria is able to deflect her shot with her sword, leaving the Gallians stunned. Meanwhile, Isara and Ramal sense a large disturbance and hurry over to the ruins, only to see a gigantic tank firing upon the ruins upon Maximilian's orders, causing the place to collapse and separating Welkin from Alicia and Faldio. Meanwhile, Imperial forces under Gregor's command seize the mining city of Fouzen and execute the defeated Gallian Regular Army general. Gregor declares himself as dissatisfied with the easy victory, having wanted the Edelweiss as the opponent instead of incompetent Gallian Regulars. Welkin manages to escape with the help of Isara and Ramal, though Faldio and Alicia are still trapped within the ruins. While waiting for help, Faldio tells Alicia of Welkin's past, highlighting the unusual ways he gets things done. When babysitter lizards appear in the ruins, Welkin realizes that there must be a path, and is eventually led to Alicia and Faldio. Alicia's gratitude to Welkin for being rescued gives way to annoyance when Welkin bombards Alicia with eager scientific questions about the babysitter lizards, leading Faldio to remark that Welkin is an "amazing guy".

War correspondent Irene Ellet comes to interview Squad Seven for her radio show. Alicia worries over what Welkin might say and dogs him everywhere in an effort to prevent him from soiling the militia's reputation, While Ellet does all she can to get Welkin alone.

In an attempt to belittle the Gallian Militia's recent accomplishments compared to the Regular Army, General Damon assigns the Militia to the Barious Desert, over the protests of Captain Varrot. Welkin and Faldio debate on the nature of the Darcsen Calamity and the true version of the event. The two Militia officers head out to visit the Valkyrur Ruins with Alicia, Ramal, and Isara when their jeep breaks down due to mechanical failure. While Welkin, Faldio and Alicia heads to the ruins on foot, Isara and Ramal stays behind to repair the jeep. In another part of the ruins, Selvaria and Maximilian decipher the Old Northern Script writings on the wall while Selvaria's blood unlocks a hidden gate. Selvaria and Maxmillian then come face to face with Welkin, Alicia, and Faldio.