Drew loses a Pokémon battle to the mysterious "Phantom," a masked Pokémon Trainer using a Dusclops. Because of the injuries sustained by his Roselia, Drew has to drop out of the Pokémon Contest in Verdanturf Town.
May is there to compete with her Skitty, and while practicing she is challenged to a battle with Phantom that Ash accepts instead. The battle is interrupted by the arrival of a woman in a limo who chases the Phantom into the woods.
The woman reveals she is looking for her son Timmy, who has been missing a lot lately, usually when the Phantom is around. The kids follow her to a mansion where they meet the entire family. Timmy's father reveals that Timmy is the Phantom, disguising himself only because his mother hates Pokémon.
Brock dresses up as the Phantom to fool the mother, but Team Rocket shows up to unmask the Phantom for a huge reward. Skitty's Blizzard attack frees Brock but also unmasks him by accident. Brock quickly runs off, and it appears that the mother did not see his face. Timmy decides to compete in the Pokémon Contest.
While preparing to enter the Verdanturf Town Pokémon Contest with Skitty, May and the others are amazed when they encounter her rival Drew, who announces that he is not going to enter as his Roselia was injured after a battle with a Dusclops belonging to a masked Coordinator. He warns the group to watch out for the mysterious Coordinator who goes by the name "Phantom". Meanwhile, Team Rocket are also in training and Jessie is preparing to enter Dustox into the Verdanturf Contest. Soon, however, Phantom approaches Ash’s group and challenges them to a battle, Ash accepts the challenge and pits Pikachu against Phantom's Dusclops. Ash attempts to use Normal-type attacks against Dusclops but, being a Ghost type, it is unaffected. Dusclops deals heavy damage to Pikachu and it seems as though Phantom will win the battle.
However, a car pulls up and Phantom flees, a large middle-aged woman, Mrs. Grimm, chases after him but soon loses him. While running away, Phantom cuts his hand on a stray branch. The gang catch up with the woman and she reveals that she is concerned for her son Timmy, who has been skipping school and hanging around with the mysterious Phantom. The group agree to reveal the identity of the Phantom so that he can be punished and stop influencing Timmy. Team Rocket overhear the conversation and also begin searching for the Phantom. Mrs. Grimm takes the group over to her mansion residence, where they find Timmy making notes on a tough Pikachu he battled that day and also has a cut on his hand. Timmy's mother notices these details and realizes that Timmy may be the Phantom. She makes it clear that she doesn't want Timmy to be a Pokémon Trainer, but instead wants him to CEO of her company when she leaves.
Timmy's father, Tommy Grimm, then approaches the group and he offers to assist with finding the Phantom. He guides them through to a study and shows them his own Phantom costume, revealing he was once a great Pokémon Coordinator. When he met his wife, he was forced to give it up because she hated Pokémon. However, his love for Pokémon remained so he created the Dusclops costume and entered Pokémon Contests as The Phantom whenever he was out of his wife's sight. However, Timmy's father gave up Coordinating when his secret became too hard to keep and put his costume away. Until one day, when Timmy found a stray Duskull and his father made him a new Phantom costume so he could train in secret and become a Coordinator. The group formulate a plan to help Timmy enter the Verdanturf Contest; Brock dresses in the Phantom costume and challenges May to a battle with both Timmy and his mother present. She begins to believe that Timmy is not the Phantom, but Team Rocket appear and attempt to reveal Brock as the Phantom to claim a reward from Timmy's mother. Jessie's Seviper constricts Brock, making him unable to keep his mask on. Skitty uses Blizzard to blow Seviper away, but Brock falls to the ground and reveals his face to Timmy's mother for a second. Ash then commands Pikachu to shoot down Team Rocket's balloon with Thunderbolt, resulting in Timmy's mother believing the trick saying that she knew Timmy wasn't the Phantom and returning to work. With Ash revealed to say "We did it", the stage is set for Timmy and May to enter the Verdanturf Contest as rivals.