Ash, Misty and Brock are finishing up a lunch break on the road to Ecruteak City, when they are accosted by a Wobbuffet. At first, they assume that Team Rocket must be nearby, but suddenly more Wobbuffet emerge from the bushes.
The group follow the Pokémon and eventually come to a town full of Wobbuffet and their Trainers. A resident explains that this is Wobbuffet Village, where everybody owns a Wobbuffet. Furthermore, the village is in the midst of its annual Wobbuffet Festival.
Meanwhile, Team Rocket have arrived on the outskirts of the village too, exhausted. While Jessie berates her Wobbuffet for popping up unannounced as usual, yet more Wobbuffet appear around them. A villager, Lulu, approaches with her own Wobbuffet and congratulates Jessie on hers. Assuming that Team Rocket are there for the festival, she invites them to her home. Though they are thoroughly bemused by the notion of a festival honoring Wobbuffet, they quickly change their tune when their host arrives with mountains of food. They are even happier to learn that there will be more food at the festival. Lulu gives Jessie's Wobbuffet a yellow headband, and takes them to see the "festival symbol", which is a huge sculpture of a Wobbuffet. While Jessie struggles to hide her incredulity, a suspicious trio watch from the cliffs above, and call out their Pokémon: Hitmonlee, Machoke and Primeape.
Ash and friends are enjoying the festival when there is a commotion. A girl, Annie, is crying because somebody attacked her Wobbuffet. Moments later, a man, Yahichi, reports that three assailants attacked his Wobbuffet too.
Team Rocket, meanwhile, are searching for the festival's food stocks. Ash and friends discover them, despite a hastily improvised disguise, and immediately conclude that they are the mystery attackers. Team Rocket protest their innocence, and are vouched for by Lulu. A report comes through of another attack, and Ash reluctantly concludes that Team Rocket couldn't have done it. He and his friends leave to investigate the attack, while Team Rocket get back to their plan to steal the festival's food.
The group arrive back at the festival to find the three festival crashers and their Pokémon standing beneath the giant Wobbuffet sculpture, having just beaten up another Wobbuffet. One of the festival organisers recalls that the same trio attacked the village a year ago. Rather than training their Fighting-type Pokémon normally, they instructed them to attack the village in order to build up their strength. When they reached Lulu's house, however, her Wobbuffet's skillful use of Counter and Mirror Coat proved to be their undoing, and they fled the village, vowing revenge. While the organiser runs to find Lulu and Officer Jenny, the trio boast that their Pokémon are now much stronger, and they intend to beat up every Wobbuffet in the village to prove it.
By now, Team Rocket have cleared out almost all of the food in the store room, when they notice Lulu, Officer Jenny and their Wobbuffet hurrying to the festival in a panic. Meanwhile, Ash challenges the festival crashers, who agree to a three-on-three battle. Ash sends out Chikorita, Misty sends out Poliwhirl and Brock sends out Golbat. Hitmonlee and Chikorita are just about to clash when Officer Jenny breaks up the battle, explaining that Pokémon battles are forbidden during the festival, in honor of Wobbuffet's characteristic of never attacking first. Ash and friends agree to observe the rule, but the festival crashers turn their attention to the giant Wobbuffet sculpture instead, making their Pokémon destroy it.
Team Rocket watch the scene from the bushes. Jessie and Meowth are baffled that the villagers are refusing to fight back in such exceptional circumstances, but James seems to understand, observing that it shows their dedication to their Wobbuffet. He suggests that they do something to help, and although Jessie is reluctant, Meowth reminds her of how well the villagers have treated them.
Ash is desperate to stop the festival crashers in their continuing destruction of the festival symbol, but Lulu holds him back, unwilling to break the festival's non-violent tradition. Suddenly, Team Rocket descend in their balloon, recite their motto and confront the villains. Despite Officer Jenny's protests, they insist on a battle with the festival crashers, explaining that they don't care about the festival's rules. Jessie sends out Arbok, and James sends out Victreebel, who attempts to eat Meowth for a change. The Hitmonlee uses Rolling Kick against Arbok, which responds with a Tackle. Machoke uses Karate Chop on Victreebel, which counterattacks with Razor Leaf, although this is blocked by Primeape. Arbok then tries to use Wrap against Hitmonlee, but is knocked out by a Hi Jump Kick before it can pull it off. Machoke also finishes off Victreebel with a Seismic Toss. Angry, Jessie sends out Wobbuffet, which looks less than threatening in its headband. The festival crashers laugh, and then order their Pokémon to attack. However, Wobbuffet Counters Hitmonlee's Jump Kick, followed by Machoke's Seismic Toss, and then Primeape's Fury Swipes. The crashers decide to combine their Pokémon's attacks in order to beat Wobbuffet, but Wobbuffet Counters all three, sending the Pokémon blasting off, Team Rocket-style.
The festival crashers flee the scene, and Lulu thanks Team Rocket for their help. However, Officer Jenny reminds them that they still broke the festival rules, and so they agree to leave. As their balloon takes off, they can be seen lifting away all of the festival's food, and so Ash, Misty, Brock and Officer Jenny give chase. Misty instructs her Staryu to burst their balloon with a Tackle, which it does. Brought down to the ground, Team Rocket send out Arbok and Weezing, pointing out that Ash and friends can't battle them, as battling is forbidden during the festival. Officer Jenny reminds them that since they are now outside the village, battling is actually permitted. Pikachu uses Thunderbolt, and Team Rocket are sent blasting off.
While Ash and friends enjoy the festival beneath the rebuilt festival symbol, Team Rocket lament their misfortune - although, as Jessie observes, they still have their Wobbuffet.