In a dark cave, Team Rocket watches a video displaying Pikachu's moves, and grow ever more determined to capture it. They are interrupted by a high laugh, and turn around to be met by a hooded figure accompanied by a Malamar, who introduces herself as Madame X. Malamar shines a bright light over Jessie, James, and Meowth.
Ash and his friends continue to Cyllage City and notice a radio observatory. Just then, a scratched-up Meowth stumbles from the bushes and collapses in front of the children, who treat it. When Meowth comes to, he thanks them graciously and tells the group, who is skeptical of his intentions, that he came to warn them about danger. He begins to tells the story; beginning with Malamar's bright light over Team Rocket. Jessie and James shook it off and sent out Inkay and Pumpkaboo, and commanded them to use Psybeam and Shadow Ball respectively, however, they were stopped by Malamar's bright light, which turned their eyes blank and brainwashed them, including Jessie and James. Meowth realized that he could remain conscious only by enduring intense physical pain, and used Fury Swipes on himself, and escaped. Meowth warns the children that they must run because Madame X is also targeting Pikachu, but they remain skeptical. Just then, a brainwashed Jessie, James, and Wobbuffet appear behind Meowth, telling him to hurry up and capture Pikachu. The group runs away only to immediately turn into Madame X and Malamar. Malamar uses its bright light, and Meowth warns the children not to look into it. Ash tells Pikachu to use Electro Ball, and the group uses the opportunity to flee, but are stopped by Jessie and James, who look to make Pikachu part of Madame X's Pokémon corps. Pikachu is lifted into the air by Malamar's Psychic and he and his captor disappear into the distant sky.
To find them, Clemont brings out a Pikachu-chasing machine, that can sense Pikachu's Electric energy and track it down. The group follows after the machine, which brings them to the radio observatory, where it gets stuck in the fence and electrocutes the group. Bonnie notices Officer Jenny's motor bike parked outside the observatory,and assume that the observatory is Madame X's hideout, and Officer Jenny received a report and came to investigate. The group goes inside, and are watched by a security camera. Inside the observatory, Malamar brainwashes Pikachu. Team Rocket notify Madame X that Ash and his friends are on the property.
In the observatory halls, Ash's group splits up, Clemont with his sister and Serena with Ash. Clemont and Bonnie are met with Malamar, who brainwashes them. They find Ash and Serena, who realize that the siblings are being manipulated. Malamar appears behind them and shines the brainwashing light over them, and they are unable to run. being blocked by Bonnie and Clemont. Ash asks Meowth to use Fury Swipes on him, and both complies, using the attack on both himself and Ash. However, Serena, not wanting her face to be scratched up, is brainwashed. Meowth cuts down a hanging planet model from the ceiling, which stalls Malamar, allowing him and Ash to escape. The pair come to an observation chamber, where they are greeted by Madame X, who makes Pikachu use Thunderbolt on Ash, and attacks him again and again. Ash is determined to get through to his partner, but the situation grows more dire as the Pokémon corps are revealed, consisting of huge and intimidating Pokémon. Pikachu electrocutes Ash continuously, forcing Ash to his knees, where he, in the midst of the electricity, tries to communicate with Pikachu. As Ash tells him that he believes in him, Pikachu hesitates in his attack. Outside the observatory, Clemont's machine awakes and rushes off towards the observatory. It comes into the observation chamber and crashes, flaming, into Malamar, and Madame X screams and falls at its defeat. All of the brainwashed people and Pokemon return to normal, including Pikachu and the Pokemon corps. Madame X's cloak falls off, and reveals her to be Officer Jenny, who had been brainwashed to act like Madame X by Malamar, who appears behind her, again well. Meowth translates for Malamar, who hopes to restructure the world using its "system of great significance", and will need everyone to be under its control. Not waiting, James and Ash send Inkay and Pikachu to attack Malamar, but it escapes.
The group runs after it, catching it in a room full of strange vines and spikes, the system of great significance. Malamar decides to abandon the place, since it was originally owned by humans ,and makes it explode, forcing the humans to take shelter. The humans, their Pokémon, and the Pokémon corps escape outside as the observatory explodes behind them, and watch as Malamar flies off into the sky. The group watches it go, and wonder what its grand plan was.
Later, Team Rocket, embarrassed at the day's events relaxes on the forest rocks. It comes to Meowth's mind that Malamar is the evolved form of Inkay, and Inkay winks.