In a long polluted river, Aang and the others continue their travels toward the Fire Lord. Aang tells the others that he thinks the river is polluted. Katara thinks they will have to find somewhere else to find food but Sokka rolls out a long schedule that he has planned out. Aang spots a village on the river and they head in that direction. They hide Appa and Momo under some heavy grass and walk to the river's edge.
They see an old man who introduces himself as Dock and offers to take them to the village. Katara tells him that they are from the Earth Kingdom Colonies. On the way, Dock explains that the river is polluted because of the factory that the army uses to make metal, which appeared. The village used to be a fishing town but with the water polluted everyone is struggling to survive.
They arrive at the village and say goodbye to Dock. As they walk around, they see people sitting in the streets looking poor and sick. Katara says that they have to do something but Sokka says no because they have a more important mission. He reminds her that they still have to take out the Fire Lord. Toph covers his mouth and tells him to not be so loud.
They walk over to the market and see Dock. They ask him if he works there too. The man explains that he is Dock's brother Xu. Aang and the others are confused but they get some fish and ask Xu if his brother could give them a ride back. Xu ducks down and Dock pops up. As they prepare to leave, a small boy runs up and asks for some food. Katara gives him a fish and watches as he runs back to his sick mother with the fish. Dock takes them back to the shore and they go back to Appa to set up camp.
Sokka says that they have thrown off their whole schedule. He suggests they wake up earlier but they say no. He then argues that they could skip meal stops. They all flatly refuse and finally he suggests that they take meal breaks and potty breaks together. Aang and the others are disgusted by this idea. Sokka says no matter what they need to leave first thing in the morning. Katara watches sadly.
The next morning Appa is sick and when Aang checks, he has a purple tongue. Aang is worried and Katara says they should go look for medicine in the town. They go to see Xu and he says that amazingly, food was delivered to the village the night before by a spirit they call the Painted Lady. He explains that she is a river spirit who protects the village in times of need.
Sokka says that they don't need to help the people because they already have someone to help them. They ask Xu for medicine but he says that the factory takes it all which is why they have so many sick people. Katara says that they need to stay another night to let Appa rest.
That night a heavy fog rolls in and a woman clad in dark robes crosses the river to the village. She enters a house filled with sick people and heals them. Lastly, she comes to the mother of the boy who Katara helped. The boy wakes up and follows her out. He thanks her and she disappears.
In town the next day, Toph gives Xu some money and asks for some more food since their friend is still sick and they can't leave until he is better. Xu explains that The Painted Lady visited them again and healed most of their sick people. Aang comments that the village seems a lot happier and more festive. At the same time the villagers are erecting a statue of the Painted Lady in the square.
Sokka comments that the Painted Lady better come back every day or the village will go right back to the way it was. Katara is angry at Sokka for saying such a thing but Sokka counters saying that only way to help the people is to get rid of the factory. He and Aang start joking about using spirit magic and making funny noises. Katara turns and angrily walks away. She walks to edge of the village and looks at the village with a determined look on her face.
That night, she dons dark robes and uses red paint to make marks on her face. As the Painted Lady, she runs off toward the village. Momo wakes up and falls on Aang. Aang wakes up and thinks it is the Painted Lady. He calls to her but she runs away. Aang gives chase through the village. Finally she hides behind a rock. Aang pops up in front of her and she hides her face with her hat.
Katara tries to play it off but Aang thinks she is familiar. She says she is busy and starts to walk away. Aang looks after her with a suspicious look. He sends a gust of wind that knocks her hat into the air. When she turns to catch it, Aang gets a look at her face. Katara turns and says hi to Aang. Shocked, Aang asks her if she is the Painted Lady. Katara says she was just trying to help the village and she wasn't at first the Painted Lady but it became her disguise.
She explains to Aang that she wants to destroy the factory once and for all. They make their way inside and use their bending to destroy all the machinery. The factory explodes and as they leave, they see the waste entering the river stop coming out of the pipes. As they head back to camp, Katara tells Aang to be quiet so they don't wake Sokka. As they turn the corner, they see Toph and Sokka standing there waiting and they freeze.
Sokka tells Katara off and says he knows everything about what has been going on. He says that they are leaving right away. Back at the factory, a fire nation soldier comes out of the smoke and looks at the village with rage. As Aang and the others are about to leave, they see a fleet of small boats headed toward the village. Sokka says that they are Fire Nation and he asks what Katara did. Katara explains that they destroyed the factory and Sokka tells her that they are leaving.
Katara refuses to turn her back on the people and she gets ready to leave. Sokka says he is going with her because she needs him. At the village, the Fire Nation soldiers say that they tried to live as neighbors in peace but now they will get rid of the village. They begin to destroy houses and docks. Two soldiers set fire to something but it is blown out each time by a gust of air. Confused, one of the soldiers looks and sees a heavy fog rolling in. There is a sound of heavy footsteps and loud growls. The small boy says the Painted Lady is coming.
Toph, Sokka and Appa are all making eerie sounds to scare the Fire Nation soldiers. Out of the fog, Katara appears in her Painted Lady costume. She charges toward the docks and lands in front of the guards. The leader tells 2 guards to do something. They draw their swords and inch forward. Katara looks up and, under the docks, Aang sends a gust of wind which knocks off the guards' headbands. They run off scared. Katara uses her bending and sends two of the Fire Nation boats into the cliff wall. She raises her hand and all the guards run away leaving the leader alone. He shoots fire but Aang blows Katara into the air and then blasts him into the river. Katara tells him to leave and never come back. He swims to his boat and leaves.
The villagers thank her and Dock comes forward but sees that it is Katara because her face paint has rubbed off. The boy says that she is the one who gave him a fish. The villagers get angry but Sokka says that even if she is a waterbender she did it for the village. They wonder what to do and from the crowd Toph suggests that they clean the river. The villagers agree and Dock also agrees to keep their secret. Dock says he will get his other brother Bushi to help clean. He switches hats and says he is Bushi. Aang jumps forward and says they are all the same. Bushi says that Dock is crazy and he was always Bushi. This leaves Aang confused and frustrated.
Helping with their bending, Katara and the others all clean until the river is pure and clean again. That night, the real Painted Lady spirit appears before Katara and thanks her. As she leaves into the mist, Katara smiles.