Cosmo Canyon is a pilgrimage site for those who wish to pursue the study of Planet life. The terrorist group "AVALANCHE" was founded in Cosmo Canyon, and Barret, the leader, promised his companions that when Shin-Ra was destroyed he would take them there. For years, Cosmo Canyon was protected by the a tribe of warriors. Nanaki (Red XIII) is the current guardian. Cosmo Canyon was once at war with the Gi Tribe but they were defeated by Nanaki's father Seto. Seto fought against the Gi Tribe, and sacrificed himself, and was turned to stone. Seto continues to watch over Cosmo Canyon as a stone statue.

During their trip to Cosmo Canyon, Cloud and his companions are told about the history and state of the planet by Red XIII's adoptive grandfather Bugenhagen. He senses that Red XIII hates his father, for thinking that he ran off when fighting the Gi Tribe. In order to let Red XIII see the truth for himself, he opens the sealed door to the Gi Caves, which is filled with ghosts of the Gi Tribe. At the end of the cave is Seto, as a statue. Red XIII learns the truth, and forgives his father. Seto sheds a tear of pride, and Red XIII obtains the Seraph Comb, a weapon he can use.
Spoilers end here.

Notable features in Cosmo Canyon include an observatory created by Bugenhagen, the Cosmo Candle, the guardian fire which always burns, and the Shildra Inn, where they serve a popular drink named after the Cosmo Candle.

Nearing the end of the game, the greatest elder of Cosmo Canyon, Bugenhagen, dies at the age of 129. The two other elders are Elder Hargo and Elder Bughe. Both Elders continue to study the history of Planet life.