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Jaden Yuki is on his way to the Duel Academy entrance exams when he bumps into Yugi Moto, who gives him a special card, the Winged Kuriboh. Jaden hurries off to the exams, but arrives late. He is given one last chance to get into the Academy, but must first beat Professor Crowler in a duel. Crowler plays the his best monster, the powerful Ancient Gear Golem, but Jaden is able to prevail using his new parter, Winged Kuriboh, and the power of his Elemental Hero deck.
Jaden arrives at Duel Academy and is placed in the Slifer Red dorm, where the drop-outs, slackers and poor duelists are sent. He stays in a dorm room with his new friends Syrus Truesdale and Chumley Huffington. It doesn't take long for Jaden to get into trouble - he is challenged to a duel by an Obelisk Blue student, Chazz Princeton, who wants to know if Jaden defeated Crowler through real skill or dumb luck.
Crowler is determined to get revenge on Jaden and expel him from the school. He leaves a fake love letter, claiming to be from Alexis, so he can catch Jaden out of his dorm after hours and thus have a reason to get rid of him. Syrus finds the letter instead, and Jaden ends up having to rescue his friend from the Obelisk Blue girls by dueling the queen of the Blue dorm, Alexis Rhodes.
Jaden oversleeps and is late for an exam. Chazz still doesn't believe that such a slacker was able to beat Crowler. Chazz and Jaden face off in a duel again, but this time Chazz has a whole arsenal of new rare and powerful cards. But Jaden has a new card too - Transcendent Wings, with the power to transform his Winged Kuriboh into the powerful Winged Kuriboh Level 10.
Jaden and his friends are taking turns telling Ghost stories. Professor Banner joins them and tells a story about the Shadow Games and an abandoned fourth dorm at the Academy. Jaden, Syrus and Chumley go to see if his story is true or not, and they meet up with Alexis. She is looking for her brother who disappeared in that area. The four of them enter the abandoned dorm, and Alexis is captured by a man named Titan who clams to be a Shadow duelist. Jaden duels against him to free Alexis.
Winged Kuriboh is able to shatter Titan's illusion and dispel his fake Shadow Game. Jaden and Titan are then pulled into a real Shadow Game, but Jaden is able to win with the help of Winged Kuriboh. He is able to rescue Alexis and they escape together with Syrus and Chumley. It turns out that Titan was hired by Crowler to help get rid of Jaden.
Jaden and Syrus are in trouble again, for leaving their room after hours and entering the forbidden dorm. They will be expelled from the Academy unless they are able to win a tag team duel as arranged by the school committee. Syrus and Jaden go to practice against each other before their big duel. On the last move of their practice duel, Syrus draws Power Bond, but refuses to play it because his brother had told him he was not a strong enough duelist, and not worthy of its power.
Syrus is planning to leave the school because of what his brother said. Jaden feels sorry for him and goes to duel against Syrus' brother, Zane Truesdale - an Obelisk Blue and the best duelist in the school. However, Zane's powerful Cyber Dragon deck proves too much for Jaden to handle, and he loses the duel. Despite losing, Jaden maintains a positive outlook and says he had fun dueling, and this makes Syrus feel better too.
Chumley's father believes he is a poor duelist and wants him to leave Duel Academy and help run the family business. Jaden and Syrus don't want their friend to leave, so Chumley's father makes a deal with him - if Chumley can beat him in a duel, he can stay at the Academy. Chumley loses, but his father has seen his great spirit and allows him to stay anyway.
The day of Jaden and Syrus' tag duel has arrived. They are to duel against professional tag duelists, the Paradox Brothers. The duel begins. Syrus is losing his confidence and is afraid that he will cause Jaden to lose the duel. He becomes increasingly worried as the Paradox Brothers summon their strongest monster, the Gate Guardian. Jaden, however, is having a great time as usual and tells Syrus to cheer up.
The duel between Jaden, Syrus and the Paradox Brothers continues. Alexis and Chumley are worried that their friends may not be able to win. Chazz, on the other hand, is looking forward to seeing Jaden get crushed. Jaden and Syrus are getting badly beaten, but Jaden hasn't given up hope yet. Seeing this, Syrus is motivated and is able to destroy Gate Guardian, and eventually win the duel using Power Bond - proving to his brother that he is a strong duelist.
Chazz is being berated by Crowler for losing to Jaden. If Chazz wants to keep his position in Obelisk Blue, he must defeat Ra's best student, Bastion Misawa, in a duel. The duel is about to begin, but Chazz suddenly raises the stakes. The loser of the duel will have to leave the Academy. Despite his cocky attitude, Chazz is defeated. Bastion passes up the chance to join the Blue Dorm, because he believes he will not be truly the best until he beats Jaden.
Syrus spots Chazz taking his luggage and leaving the school after being defeated by Bastion. Jaden and Syrus sneak out of class to try and stop him, but are caught by Alexis and her friends, Jasmine and Mindy. Instead of sending Jaden and Syrus back to class, Alexis decides to join them in finding Chazz. They are interrupted by a monkey wearing a Duel Disk who kidnaps Jasmine. Jaden duels against the monkey to rescue her, but while they are distracted, Chazz leaves the island.
Only a few students are left on the island over the winter break, Jaden and his friends included. They are enjoying their time off in the Slifer dorm cafeteria, when an Obelisk student rushes in, and explains that he and some of his Obelisk Blue friends were attempting to revive the spirit of Jinzo, the Psycho Shocker, but not really believing it would work. However, it was successful and now Jinzo has taken his friends' souls. The group heads out into the forest and finds Jinzo. Jaden defeats him in a duel and he returns the souls he took. The next morning, everyone thinks it was all a dream. But Jaden knows that it wasn't, and that duel spirits really do exist.
Jaden and Syrus are playing tennis, and Jaden complains that it has nothing to do with dueling. While he is distracted, he accidentally hits the ball towards Alexis. Another student deflects the ball away, but it ends up hitting Professor Crowler. Alexis thanks the other student for saving her, and he reveals that he has a crush on her, challenging Jaden to a duel in which the winner will become Alexis' fiancee. Jaden, not realizing exactly what he means, accepts the duel and wins. Afterwards, he asks Alexis what fiancee means, and she berates him and calls him an idiot.