Team Rocket talks to Giovanni on the video phone, and he yells at them for not making progress, threatening to replace the three of them.
The kids are eating breakfast when Skitty runs off and encounters a Spoink that has lost its pearl. The Spoink shows how it rolled away, so the kids help look around the forest. Spoink keeps mistaking various round objects for its pearl—like an Igglybuff—and putting them on its head.
Just as they find the real pearl, all of them are caught in a Team Rocket trap, but Ash's Corphish helps them get out. Spoink drops its pearl and Meowth catches it. Team Rocket runs off to a nearby carnival.
At the carnival, James runs into the Magikarp salesman, who is now selling Feebas. Drawn by the promise of Feebas evolving into a Milotic, Jessie trades the pearl. But when their new Feebas is swimming, its paint washes off, revealing just a Magikarp.
Ash and friends arrive, and both groups go looking for the salesman. Brock and Max reveal the scam, and then everyone confronts the Magikarp salesman. The kids start to battle Team Rocket, and the salesman slips away in the confusion. Spoink passes out, but Max grabs the pearl and puts it on Spoink's head. Spoink then uses Confuse Ray to send Team Rocket blasting off.
Team Rocket follow protocol and contact Giovanni, however they have no news to report. Giovanni asks about the progress of the new Secret Base, but the trio admit that it was destroyed. He declares that their Hoenn region mission has been a costly failure and suggests he’ll have to bring in Butch and Cassidy to finish the job instead. Giovanni signs off while Jessie and her teammates are left fuming. Optimistically, the trio declare that it is time for a new beginning.
The next morning, Ash and his friends sit down to enjoy breakfast. Some rustling in the bushes catches Skitty's attention, and a Spoink soon appears. Max realizes something amiss, and after listening to Spoink's Pokédex entry he declares that Spoink is missing the pearl on its head. Ash and the others decide to help the distressed Spoink locate its pearl. Firstly Spoink escorts the group to where it lost its pearl—down a cliff. With the pearl nowhere close by, Brock calls on Mudkip’s assistance. Though they look hard for it, the Spoink tries to put any round objects it sees on its head, including an Igglybuff, a Voltorb, and an Electrode. When the pearl is found, however, Team Rocket, working with renewed vigor after Giovanni threatened to replace them, attack the group. They use a traditional pitfall trap and introduce themselves as the "new Team Rocket". After snaring the twerps in a net, Ash calls out Corphish to free everyone, but Spoink's pearl ends up in Meowth's hands as they land on the ground. Jessie and James order Seviper and Cacnea to attack. Corphish escapes Seviper's Wrap attack and uses Harden to negate damage from Cacnea's Pin Missile. Then Corphish and Mudkip send Team Rocket flying with a Bubble Beam and Water Gun combo. Ash and the others soon notice the absence of Spoink's pearl and chase after Team Rocket.
After blasting off, Team Rocket comes across a fair, and Ash and company chase Team Rocket onto the fairgrounds, where they initially lose sight of each other. Spoink tries a few more round objects, like a juggler's balls and a fortune teller's crystal ball. Team Rocket, meanwhile is approached by the same Magikarp salesman who has made James' life a misery in the past and offers to trade "Feebas" for the pearl. Though James is wary of the known swindler, the Magikarp salesman reveals that Feebas evolves into Milotic, the most beautiful of all Pokémon, Jessie becomes dazzled by the possibilities. After hearing the salesman’s spiel, Jessie ignores her teammates concerns and hands over the pearl in exchange for the "Feebas".
Jessie is eager to get the "Feebas" to evolve, so they let their new Pokémon go for a swim in a nearby river. Soon, "Feebas'" color begins to change, but not with the glow of evolution. Rather "Feebas" is revealed to be a painted Magikarp, and the trio are furious that they have been swindled once again. Ash and his friends confront the Rocket trio, and after learning what occurred, they criticize them for trading the pearl for a worthless Magikarp. Both groups head back to the fair to find the crooked salesman. When they find him, he's trying to sell "Feebas" to the passing trade, so Brock has Mudkip use Water Gun to reveal the scheme. When the salesman tries to flee, Ash and company corner him and in the ensuing struggle, the pearl slips out of his bag. Team Rocket arrives only moments later and a battle ensues, but Spoink is reunited with its pearl and uses its powerful Psychic attacks to blast Team Rocket off. During the commotion, the Magikarp salesman escapes to swindle another day. But, as Ash remarks at the end, at least they found the pearl.