The episode starts with Aang, Sokka, and Katara flying on the back of Appa. Katara comments that the clouds look soft as if one could jump onto it. Sokka sarcastically tells her to try it and offends her. Then, Aang shouts that he will try it and jumps off Appa. He flies through the clouds as Katara and Sokka watch. He returns, soaking wet. Then, Katara points out a location in the forest, where all the trees are burnt, leaving a gray wasteland. After landing, they look around. Sokka soon discovers footprints and comes to the conclusion that the Fire Nation was behind the act. Aang is depressed by the fact that he was not able to do anything to stop it, so Katara approaches him to console him. He criticizes himself, saying that he doesn't know how to do his job well as the Avatar. Katara reminds him that this was the reason why they are going to the North Pole to find a teacher. He begins to wonder how to speak to Avatar Roku to ask for guidance, but he came up with no conclusions.
Meanwhile, Zuko is looking for Iroh in the forest. He eventually finds him content in a hot springs, bathing. Zuko reminds him that they are on a mission, to capture the avatar. However, Iroh encourages him to relax and join him in the hot springs. Zuko orders him to get out, and Iroh starts to rise. Zuko quickly shields his eyes from Iroh, using his hand to block his view from his genitals. He changes his mind, and tells him that he can remain for another thirty minutes, but he would leave him, if he wasn't on time. Iroh continues his bath.
Meanwhile, Aang is still depressed about the burnt forest. Katara asks him whether he was ready to be cheered up or not. An acorn is thrown at his head. Sokka laughs, saying that he is cheered up, and Katara throws an acorn at him. He reminds Aang that the forest will grow back, since acorns were scattered throughout the burnt landscape. Just as Aang starts to feel better, an old man appears and begs him to help his village. Soon they arrive to a dreary village with many of its building destroyed. The old man introduces Aang to the village chief. He tells him that an angry spirit is terrorizing them, capturing many of their townspeople, and they don't know the reason. He asks him to solve the problem. Aang reluctantly accepts the task. Katara, pulling him aside, senses this and asks him how he was going to accomplish the task. He says that he doesn't know, but he is going to try his best. Katara give him encouragement, followed by a pessimistic comment from Sokka.
Meanwhile, Iroh had fallen fast asleep in the hot springs but was soon awakened by a noise coming from the bushes. He asks who was present, but only a meadow vole appeared. Then, the vole starts to make noises. Earthbenders appear and trap him inside the hot springs. The captain reveals to the other soldiers that he is Iroh, the once great general, Dragon of the West.
Meanwhile, Aang is facing the village gate, looking into the forest beyond. Everyone else is hiding in the meeting house. He asks the spirit to stop terrorizing the town, slamming his staff into the ground as the sun set. He thinks he has done his job and starts to walk back to the village. Then, the disgruntled spirit, Hei-Bai, emerges from the forest. He starts to greet it, but the spirit starts to attack the village. Aang tries to gain its attention as it continued its rampage, only to be slammed into a building. Sokka becomes worried and runs out to help him with Katara objecting. Outside, he meets up with Aang, telling him that they can accomplish the task together. However, the spirit sneaks up behind them and captures Sokka, and it starts to take him into the forest. Aang chases after it.
Meanwhile, Zuko pushes branches aside as he approaches the site, where Iroh was in the hot springs. He views a ruined hot tub with Iroh absent. A soldier accompanying him suggests that he might have thought that they had left without him. However, Zuko was not convinced as he suspected something was out of place. The soldier suggests that a landslide might have chased him away, but he points out that land does not slide upward. He comes to the conclusion that he has been captured by Earthbenders.
Meanwhile, Aang is in hot pursuit of the spirit that captured Sokka. He was able to get closer to the hand that the spirit was holding Sokka as he reached his hand out. Sokka reached his hand out also. Aang was almost able to grab his hand and pull him free, but the spirit, suddenly, disappeared, along with Sokka. Surprised, Aang fall to the ground in front of a bear statue.
In the next scene, Iroh is seen with the Earth Kingdom soldiers, chained up on an ostrich. Iroh asks, where they were taking him, and the captain tells him that they are going to Ba Sing Se, the site of Iroh's greatest military defeat to stand trial. Iroh acknowledges his defeat to the captain but makes an excuse that he and his troop were tired from a long siege. He yawns and falls down to the ground. The soldiers pick him up and place him back on the ostrich, but Iroh exhibits a smirk as he had cleverly left a sandal on the ground to provide a trial for his rescuers.
Meanwhile, Katara is looking into the forest, waiting for Aang to return, hopefully with Sokka. The old man tries to console her, reminding her that Sokka is in good hands, since Aang is the Avatar. He suggests her to rest. Then, Aang starts to appear from the forest as the sun rose. He tells Katara that he had lost him. However, either she nor the old man would respond to his voice. He looks at his hand which looked blue and transparent and realized that he was in the Spirit World.
Meanwhile, Zuko is in search of Iroh. He locates the sandal that he had dropped on the trail earlier. He sniffs it and is disgusted by the smell. He comes to the conclusion that it did belong to Iroh.
Meanwhile, Aang is continuing to talk to Katara and the other, even though he knows that they cannot hear them. He asks into the blue, where he could find Avatar Roku. Then, he sees a glint of light appearing in the sky in the direction of the entrance. He wonders, if it is Sokka, but he soon finds out that it is a dragon spirit. He tries to airbend his glider to his hands, but he couldn't, and he realizes that he cannot bend in the Spirit World. The dragon approaches him, and reveals to him that he is Roku's animal guide. Aang boards it, and they take off.
Uncle Iroh sees them fly above him and then he escapes. Aang lands on an island with a temple with a statue of the past Avatar. He has a vision of a meteor. He learns that he must return to the location on the solstice in order to speak with him. Meanwhile, Katara is flying on the back of Appa and is seen by prince Zuko.
The dragon takes Aang back to his body, while the earthbenders are about to crush Iroh's hands, but they are stopped by Zuko, who chose to save his uncle instead of going after Katara. They fight back to back and beat the earthbender soldiers. Aang returns to the village, while the sun was setting in the background. The spirit appears again, but Aang immediately presented it with an acorn, telling it that new life will rise from the burnt ashes. The spirit calms down and transforms into a panda, peacefully walking back to the forest. The people come back. Aang then reveals that they need to go to the Roku's temple on an island. However, he reveals it was in the Fire Nation, and Katara and Sokka give a terrified expression.