Katara and Aang are packing up their campsite. Aang is planning to visit the only home he has known, the Southern Air Temple. Sokka wants to sleep a bit longer. Too anxious to wait, Aang picks up a stick and slides it across Sokka's sleeping bag. Aang shouts to Sokka there's a snake in his sleeping bag. Terrified, Sokka leaps up screaming. After falling to the ground, Sokka realizes he's been tricked but now that he's up, they can leave.
Prince Zuko docks at a Fire Nation harbor. His ship needs substantial repairs from his encounter with Aang. Zuko wants the repairs done quickly so they won't lose Aang's trail. He warns Iroh not to mention the Avatar during their stay so no other fire benders will start looking for him. Zhao walks up to Iroh and Zuko welcoming them to his harbor. Zuko and Iroh learn of Zhao's promotion from Captain to Commander. Seeing how damaged their ship is, Zhao asks how it happened. Zuko makes up a story about crashing into an Earth Kingdom ship. Curious, Zhao invites the pair of them for a drink. Zuko attempts to get out of it but Iroh speaks for both of them and accepts the invite.
The gang is flying on Appa. Sokka is hungry and they don't have any food. Katara is trying to keep Aang from getting too excited about their visit to the Air Temple. She tells him to expect the possibility that his people have been killed by the Fire Nation. Aang is convinced she's wrong on the grounds that you have to fly to reach an air temple and the Fire Nation couldn't possibly accomplish that. They reach the top of the mountain (above the clouds) and look down on the Southern Air Temple. Aang feels he is home.
Commander Zhao is explaining the Fire Nation' planned victory to Zuko and Iroh over tea in his tent. Zuko doubts the plan will work. Zhao asks about Zuko's search for the Avatar. Zuko replies he has been unsuccessful. Zhao says he didn't expect anything different. Zuko looks away. From this Zhao figures out that Zuko is lying and tries to pressure him to tell the truth. Zuko gets up to leave but Commander Zhao's guards stop him. One of Zhao's soldier's walks in and reports that he interrogated Zuko's crew and found out that Zuko had the Avatar but let him escape. Zuko has no choice but to tell Zhao the truth now.
Sokka is still very hungry. However, Aang begins to give Katara and Sokka a tour of the temple but becomes disheartened almost immediately. Seeing his home abandoned he realizes how much things have changed. To cheer him up, Sokka volunteers to play airball with Aang. Lying on the ground after being creamed at airball, Sokka spots a Fire Nation helmet. He points it out to Katara and they agree to tell Aang. When Aang begins to walk over, Katara changes her mind and covers the helmet with snow. Aang wants to show them the rest of the temple. Sokka discourages Katara protecting Aang's feelings like she just did. Katara points out to Sokka that Aang would be devastated if he knew fire benders invaded his home. They come to a statue of a monk. Aang introduces the monk as Monk Gyatso. Gyatso was Aang's mentor and father figure. Aang flashes back 100 years ago to a day with Gyatso.
Gyatso is teaching Aang how to make cakes. Aang isn't listening. Aang is now burdened with the knowledge that he is the Avatar. Gyatso reassures Aang that he will be fine. Once Aang is old enough to enter the Air Temple Sanctuary, he will meet someone who will help him to become a better Avatar. Gyatso has Aang do some air bending target practice by blowing the freshly baked cakes through the air and onto the other monk's heads.
Returning to the present, Aang starts to make for the Air Temple Sanctuary. There's someone he's ready to meet. Katara is doubtful that anyone is in the closed off temple after 100 years. Sokka hopes that the person in there has some food. To get into the Sanctuary, Aang has to do some air bending. The door opens and Aang calls out Hello and begins to walk into the darkened temple. Katara and Sokka follow him.
Commander Zhao is appalled that a twelve year old boy bested Zuko and his crew. Zhao is going to hunt the Avatar from now on. Zuko leaps for Zhao in a rage but Zhao's guards hold him back. Zhao orders for Zuko and Iroh to be kept in his tent and leaves. Frustrated, Zuko kicks over the tea table.
The Air Temple Sanctuary is filled with hundreds of statues. Sokka is thoroughly disappointed about there not being any food. Katara and Aang notice a pattern in the lineup of the statues. They're lined up in the Avatar cycle (Air, Water, Earth, and Fire). From that Katara figures out that these are statues of Aang's past lives. All of the statues are Avatars! Aang singles out the last statue in the lineup. He gazes into the statue's eyes and goes into a kind of trance. A gentle shake from Katara breaks the trance. Aang (somehow) now knows the statue is a statue of Avatar Roku, the Avatar before him. Sokka recognizes Roku as a fire bender and thinks that is why he didn't trust Aang when they first met. The three of them hear a noise and duck behind some statues. Thinking it's a fire nation soldier, Sokka is ready to pounce. When he comes around the statue, Sokka and the others see it's just a lemur. Desperately hungry, Sokka wants to eat the lemur. Aang wants to keep the lemur as a pet. There's race to see who can catch the lemur first. Katara stays behind in the temple while the boys run after the lemur. Turns out this lemur can fly. Aang jumps off the balcony of the temple in his determination to catch the lemur.
Commander Zhao and his search party are almost ready to set sail on their search for the Avatar. Zhao will not let Zuko go until his ship is out at sea. Zuko is confident that he is going to capture the Avatar first. Zhao laughs at the thought. A banished prince compete, with a resourceful commander. Zhao tells Zuko his father would let him come home without the Avatar if he really loved him. All that Ozai sees in his son is failure. Zuko challenges Zhao to an Agni Kai at sunset. After Zhao leaves the tent, Iroh reminds Zuko about how his last duel with a master fire bender turned out. Zuko doesn't need reminding.
After landing safely, Aang follows the lemur and discovers a room where lots of fire nation soldier's bodies lie around Monk Gyatso's corpse. Aang starts to cry. Sokka catches up to Aang and sees what has made him so upset. As Sokka tries to comfort Aang, Aang's Avatar Spirit kicks in and he creates a whirlwind around himself. Back in the temple, Katara observes that all the statues' eyes are now glowing. Realizing Aang must be the cause of this, she runs out to find the boys.
At the Water, Fire, and Earth temples, Avatar statues are glowing. In the Fire Temple, the fire sages hasten to inform the Fire Lord that the Avatar has returned. After finding a windswept Sokka, Katara is informed that Aang found out that fire benders killed Gyatso. Aang's anger now has him floating inside his whirlwind. Katara makes her way toward the whirlwind to calm Aang down. It's sunset and Commander Zhao and Prince Zuko are ready to fight. The offense and defense change frequently in the duel. Zuko finally gets Zhao lying on the ground. Zhao expects Zuko to kill him in victory. Zuko shoots a blast of fire past Zhao's head promising next time Zhao is in his way, he won't hold back. Sore about losing, Zhao sends a jet of fire at Zuko's back. Iroh stops the blast. Zuko wants to take up the fight again but Iroh will not let him taint his victory. Iroh lectures Zhao about how dishonorably he has acted and that Zuko is more honorable even in exile. Iroh is still polite enough to thank Zhao for the tea. As Zuko and Iroh leave the arena, Zuko asks Iroh if he really meant what he said back there. Iroh makes a joke about the tea.
Katara calms Aang down by telling him even without Gyatso he still has a family (Katara and Sokka). Standing in front of Roku's statue again, Aang wonder how Roku can help him if he's dead. The lemur reappears, has a variety of fruits and lays them in front of Sokka. Sokka doesn't waste any time in eating them. The lemur climbs onto Aang's shoulder. After the lemur takes a peach out of Sokka's hand, Aang decides to name his new pet Momo. The gang flies off on Appa and Aang looks back at his old home before it vanishes behind the clouds.