In Pallet Town, Professor Oak is looking up Shigeru's and Satoshi's Pokédex on his computer. Just then, Shigeru's sister comes in with some drinks as Professor Oak is starting remembering about his past. He remembers being on his Pokémon journey, getting info for his Pokédex. He pulls out a picture, remembering how Shigeru's parents opposed to his journey. Then one day, someone tells him that Shigeru's parents were in an accident. With them dead, Shigeru and his sister had to be taken under Professor Oak's care. Meanwhile, Satoshi is out with his Charmeleon in Lavender Town when he spots a Cubone in a window. The woman inside lets him in, explaining that she serves as a Pokémon orphanage. Satoshi asks about the Cubone staring out the window, and she explains that Team Rocket had killed its mother. Satoshi wants to reunite the lonely Pokémon, so he decides to venture into the Pokémon Tower. Soon after he enters, he spots a bunch of gravestones for Pokémon. Before he can get a good look, a stream of mist lurks behind him. It's a Gastly, and Satoshi and his Charmeleon run and hide behind a bush.
Just then, he spots two members of Team Rocket coming out of the building holding a Silph Scope. Satoshi learns that Team Rocket have a hide-out in the Game Corner in Celadon City, so he decides to go there. At the Game Corner, he spots Team Rocket go into a door. Satoshi spots some Silph Scopes on a table, and he snatches one for himself. Now he can see the ghosts in the tower. Giovanni is watching Satoshi, via hidden cameras, surrounded by some grunts. He orders the grunts to go after Satoshi and stop him from potentially ruining their plans.
On his way out of the city, Satoshi spots the Celadon Gym. He decides to stop and challenge the Gym Leader, Erika. After introducing herself, Erika is doubted by Satoshi. But soon the battle starts, Erika uses a Vileplume while Satoshi uses his Charmeleon. Vileplume fires leaves and Charmeleon retaliates by breathing fire. The fire catches Erika's kimono on fire and Charmeleon jumps to Erika and slashes the fire out. They are about to announce Erika the winner (because Satoshi's Charmeleon slashed Erika and went out of bounds), but Erika stops her. She admires Satoshi for raising his Charmeleon to be considerate, so she rewards him the Rainbow Badge.
Satoshi looks at the clock, and remembers about the Pokémon Tower and his Silph Scope. He runs to Lavender Town. When Satoshi arrives to Lavender Town, wearing the Silph Scope, and is able to see the ghosts clearly in order to pay his respects. As he walks in, he notices Marowak's grave smashed to pieces. Team Rocket appear with Giovanni. Giovanni introduces himself to Satoshi as the boss of Team Rocket, takes the bouquet Satoshi had for the spirits, and crumbles it up. He snaps his fingers and a Machamp appears. Satoshi worries that Charmeleon isn't experienced enough to beat such a powerful Machamp and seems doomed. However, a ghost appears from a tombstone and it's a Haunter. Machamp instantly starts to thrash at the Haunter, but its physical attacks have no effect. Haunter easily beats Machamp, and so Giovanni and the rest flee.
Later, incense is burnt for the dead Pokémon. Mr. Fuji reaches from behind a tombstone and gets out the Poké Flute. Just then, the "Haunter" turns out to be the ghost of Marowak, that raises into the sky, able to rest in peace. The Cubone watching from its window perks up as she sees its mother once more.
