The Anarchy sisters, Panty and Stocking, are angels who were kicked out of Heaven due to their bad behavior. They are sent to Daten City (a pun on the Japanese word datenshi (堕天使, lit. "Fallen Angel")), a place located on the edge of Heaven and Hell. Strange monsters called "Ghosts" besiege the city, but the Anarchy sisters wield a variety of mysterious powers, most notably their ability to transform their underwear and stockings into weapons.
Under the watchful eye of Reverend Garterbelt, and with their pet zipper-dog Chuck, it's up to Panty and Stocking to destroy these Ghosts, in order to collect enough Heaven Coins to return to Heaven.