Picking up where the last episode left off, when Kisame uses Suiton: Suikoudan no Jutsu (Water Style: Water Shark Blast Technique), it is immediately copied and countered by Kakashi, who then turns his attention to Itachi and Kisame.
Jiraiya requests that Naruto come with him on a research in order to find a particular mission (Tsunade), but Naruto is a bit skeptical, believing that this is only an excuse for Jiraiya to do more perverted things. What Naruto would like is for Kakashi to train, as he believes that Sasuke has been getting special treatment from Kakashi since he taught him the Chidori. When Naruto refuses, Jiraiya laments, stating that he knows a technique even more powerful than Chidori. As a result, he'll have to take someone else...Sasuke, perhaps? Naruto jumps at the opportunity and immediately runs off to pack.
Kakashi is not surprised that Itachi has the same eyes as before, but then again, he is a true heir of the Sharingan. Kisame remarks that he wouldn't have believed that his technique could be copied by no one other than Copy Ninja no Kakashi (Kakashi the Copy Ninja) unless he'd seen it himself, but it's Kakashi who should be surprised, as he did sense something suspicious about the two individuals who showed up at the teahouse earlier. Turns out that they were Uchiha Itachi and Hoshikagi Kisame from Kirigakure no Kaijin (Hidden Mist Village). Kisame, as Kakashi notes, is one of the Kiri no Shinobigatana Shichinin Shu (Seven Swordsmen of the Mist). Kisame seems to know about Team 7's battle with Zabuza. He's ready to battle, when Itachi intervenes, saying that fighting Kakashi alone could result in dire consequences, as well as the possibility of other shinobi arriving. Therefore, the real Kakashi (the one speaking to Kisame was a Kage Bunshin) asks the two what their purpose is for being in Konoha.
At the same time, Sasuke is in the Uchiha manor, clenching his fists for some unknown reason.
Itachi pulls out four shuriken as Kakashi backs up, using Ninpou Suiton: Suijinheki (Water Water Encampment Wall) in order to block an attack from Itachi that came in the form of water cyclones. The shuriken were only a distraction, as Kakashi did not see Itachi form any seals. A Kage Bunshin stabs Kakashi from behind, yet it turns out that this Kakashi was only a Mizu Bunshin (water clone). Kisame's impressed that a copy ninja could know that many techniques from his village. Underwater, Kakashi passes Kurenai a kunai, then jumps forward and grabs her, whispering that this is the Kage Bunshin, which explodes.
Itachi is impressed that Kakashi can use the Sharingan so well despite not being an Uchiha, but that's just it, an Uchiha's body is better suited to the Sharingan, which explains why Kakashi tires out so quickly after using it. Itachi prepares to show the Sharingan...the Kekkai Genkai's true power. Kakashi warns Kurenai and Asuma to close their eyes, as if they open them, they're dead, as only someone with the Sharingan can resist this technique...the Mangekyou Sharingan. While that's true, the special Sharingan technique, the genjutsu Tsukuyomi (meaning 'God of the Moon') cannot be countered. Through Tsukuyomi, Kakashi is taken to an illusionary world of red and black where he is bound to what appears to be a cross (it's really a 'T'). In this world, Itachi controls all space, time, and even the mass of objects. As he says this, he stabs Kakashi repeatedly with a sword, which will continue for the next 72 hours. Later, Kakashi looks up and sees himself further off in the same position, with the same two Itachi stabbing him. Soon, a large number of Kakashis are bound and being stabbed by possibly an even greater number of Itachis. All of this pain only amounts to one second.
When the genjutsu is over, Kakashi collapses from fatigue while Itachi remains standing. Asuma asks what's wrong, noticing that Kakashi went down only after Itachi finished talking. Three days in the whacked genjutsu only amounted to a second in the real world. Kisame is surprised that Kakashi is still able to stand, then he warns Itachi not to use that technique too much, as it seems to be doing a number on his eyesight. The two are not after Sasuke, but the legacy of the Yondaime (Fourth) Hokage...Naruto.
In a flashback, Jiraiya tells Kakashi that he will take care of Naruto. When Orochimaru left Konoha, Jiraiya was sure that he would return, but it turns out that he had joined a certain organization which Jiraiya does not know all of the details about, aside that the name of it is Akatsuki and consists of nine shinobi, most of whom are S-ranked criminals in the bingo book, Itachi one of them. Up until now, all they've done is collect information, but Orochimaru left the organization. Akatsuki then separated into teams of two and traveled all over the place, collecting new jutsus and such. What does Naruto have to do with this? The mystical and ultimate Chakra of the Kyubi is what the organization is possibly looking for. Jiraiya will watch over Naruto, while Kakashi is told to look after Sasuke and help him develop his Sharingan.
Back in the present, Kakashi repeats some of this same information when Kisame and Itachi decide to take him. Kisame charges forward when all of a sudden...
"Konoha Gouriki Senpuu!" (Konoha Strong Whirlwind)
Gai arrives and gives Kisame a powerful kick to remember. He introduces himself as Konoha's Noble Blue Beast...Maito Gai. Itachi warns Kisame not to underestimate Gai when all of a sudden, Kakashi collapses. Asuma warns Gai not to look into Itachi's eyes, but Gai is well aware of this and took into consideration how to counter the Sharingan: just don't look into their eyes- keep your eyes on their feet, predict their movement, and counter accordingly. Gai has Kurenai take Kakashi to a medical ward, while he and Asuma will fight until the ANBU reinforcements arrive. Kisame accepts this challenge and prepares Samehada, but Itachi tells him that they did not come to start a war; their business is done. The two are instantly gone.
Meanwhile, at Konoha's gates with Jiraiya, Naruto is packed and ready to go, but he's a bit TOO excited and overdid the packing.