While a Cardassian freighter, the Bok'Nor, is docked at Deep Space 9, a human posing as a Starfleet maintenance worker tampers with a nearby wall panel. Shortly thereafter, the freighter explodes while leaving the station. A subsequent investigation reveals no signs of explosive devices or other obvious methods of sabotage, but traces of mercassium, a compound unique to the United Federation of Planets, are found in the debris of the Bok'Nor Although the explosion may have been an implosive protomatter device, O'Brien informs Sisko that he cannot be sure.
Starfleet sends Calvin Hudson, the ranking officer in the demilitarized zone along the Cardassian border and an old friend of both Sisko and Dax, to the station to investigate the possibility of retaliatory attacks. He tells Sisko his presence on the border is a joke; his assignment has been to help colonists whose land the Federation gave to Cardassia adjust to the new circumstances. Contrary to Starfleet's belief, Hudson is sure the Cardassians will not retaliate, but he guarantees a response will come.
Meanwhile, the man who sabotaged the Bok'Nor is abducted. When Sisko returns to his quarters that evening, he finds Gul Dukat waiting for him. Dukat explains that Cardassian Central Command is unaware of his presence on DS9, but he has come unofficially to help Sisko find the truth about the destruction of the freighter. In order to do so, the two of them take a runabout to a group of colonies in the demilitarized zone, which Dukat describes as "not so demilitarized any more." There, they find two Cardassian attack vessels attacking a Federation merchant ship; before the runabout can intervene, another Federation vessel arrives and destroys the Cardassians.
Back on the station, Quark has arranged a "business" dinner with a Vulcan woman named Sakonna. She is eager to begin negotiations but he quotes one of the Rules of Acquisition: "Never begin a businss negotiation on an empty stomach." When he describes the Rules of Acquisition, she finds them logical and "quite reassuring." Once Quark is ready to discuss business, he is surprised to hear she is looking to acquite weapons: She wishes to acquire a continuous supply of "guns, phaser banks, photon torpedoes, troop transports, and a number of cobalt thorium devices," among others.
In the demilitarized zone, Gul Evek, the Cardassian attache to the demilitarized zone, is in a heated debate with Cal Hudson when Dukat and Sisko enter the room. When they describe the incident they observed, both sides seem to feel that their colonists were justified. Evek then produces a confession from the Bok'Nor saboteur, William Patrick Samuels, but claims that Samuels committed suicide shortly after giving it. One of the colonists present attacks Evek and must be restrained.
Later that night, Hudson warns Sisko that the Cardassians have no intention of allowing the Federation colonists to stay and tells him the Bok'Nor was likely transporting weapons to Cardassian colonists. He concedes that Samuels might have destroyed the freighter but claims the colonists have the right to defend themselves. On the way back to Deep Space Nine, Sisko discovers Dukat knew of Samuels' confession but knew nothing of the "suicide." Furthermore, Dukat swears on the lives of his children that the Bok'Nor was not transporting weapons.
Sekonna requests that Quark move the weapon shipment schedule forward and he complies greedily. Meanwhile, O'Brien has confirmed what Sisko believed: The bomb that destroyed the Bok'Nor was of Federation origin. Shortly after Sisko's and Dukat's arrival on the station, a group consisting of a man posing as a Starfleet security guard, Sekonna, and several colonists who were present during the confrontation between Evek and Hudson kidnaps Dukat. Sisko and the rest of the crew determine the course the terrorists most likely took and he, Kira, and Bashir follow them in a runabout. Before the trio leaves, an anonymous transmission from the demilitarized zone attributes the boming of the Bok'Nor and the recent kidnappings to a group calling itself the Maquis.
They follow the Maquis into an area called the Badlands with which Bashir is unfamiliar. Kira explains that it is an area of the Cardassian-Federation border with frequent plasma storms, which pilots generally try to avoid. "Sounds like the perfect place for a hideout," he observes. They beam to the surface of a planet, where the armed Maquis members emerge from nearby foliage — followed by Cal Hudson, out of uniform.