The Miltian Conflict is a catastrophic event that occurred on Old Miltia in the year T.C. 4753 (fourteen years prior to Xenosaga), with origins in the mysterious Zohar Incident. The main impetus of the conflict was the power struggle between the Immigrant Fleet descendants who traditionally held power on Miltia, and the Federation attempting to extend its control over the planet. The military arm of the Immigrant fleet, the U-TIC Organization, began buildup on Miltia to maintain their independence from the Federation. In addition, the Federation desperately wanted to take Joachim Mizrahi into custody as a means of aquiring control of his Zohar research and learning how to counteract the various weapons and resources U-TIC had gained from such. When U-TIC refused to turn him over, the Federation began dispatching troops to Miltia. Their first and second descent operations ended in partial failure, as Federation forces met with the surprising strength of U-TIC's forces (including Proto-Ω). U-TIC also had a trump card: the Song of Nephilim Device, which they planned to activate to drive many Realians insane and weaken the Federation forces, not mention provide a sizable distraction permitting the escape of key personnel.

Finally, in a third descent operation, the U.R.T.V.s were sent in to eliminate the threat of U-DO (ostensibly to stop the Zohar from supplying power to the U-TIC A.M.W.S. units, but in reality because of machinations by Dmitri Yuriev, stemming from his obsession with U-DO) using their anti-existence waves. The U.R.T.V.s managed their way into Labyrinthos, gathered around U-DO and prepared to destroy it. Just before they did, their leader, U.R.T.V. 666 "Rubedo" (a.k.a.Gaignun Kukai, Jr.), realized that use of the U.R.T.V.'s multiple anti-existence waves, which were designed to neutralize U-DO but not to neutralize each other, would result in a waveform collision which would release enormous amounts of thermal energy, destroying the entire planet. Fearing for the lives of his brothers and companions, Rubedo decided to cut the psychic bond that was used to create the anti-existence waves, which left all of the other U.R.T.V.s unprotected against U-DO. The U.R.T.V.s were then either killed or driven insane by U-DO save for Rubedo and U.R.T.V. 669 "Nigredo," who had been badly wounded. But probably the worst outcome of all this was when U.R.T.V. 667 "Albedo" made partial contact with U-DO which drove him insane.

Near the end of the fighting, Sellers activated the Song Device, causing wanton destruction by mad Realians and human soldiers. Amidst the chaos of battle, a young Shion fled to the Acute Neurosis treatment Facility, adjacent to Labyrinthos, to find her parents. She watched as they were brutally killed by 27-series Asura combat Realians. This drove Shion over the edge of despair, causing her latent abilities to resonate with the Zohar, resulting in direct communication with U-DO. In response, U-DO opened a portal between the real and imaginary realms, and the Gnosis entered the real realm en masse. Joachim Mizrahi tried to minimize the damage of the expanding Gnosis phenomenon by sealing Miltia from access to the U.M.N. before falling to his death from atop Labyrinthos. The space-time anomalies continued until the whole planet was cut off from space by the dual black holes, known as the Abyss.

In actuality, the entirety of the Conflict was orchestrated by Wilhelm to cause Shion's anguish to summon Abel's Ark. She failed, however, to produce the desired result, forcing Wilhelm to attempt to achieve this objective through other means.

After the conflict, the Ormus society, fronted by U-TIC, searched for the Y-Data. This package held the secrets behind the conflict as well as the ability to retrieve Old Miltia and the Original Zohar that was stored within the Labyrinthos base.