Team Rocket decides to go their separate ways after yet another foiled Pikachu kidnap attempt. Elsewhere, our heroes come across a one-day Pokémon Battle Tournament secretly run by Butch and Cassidy, who are having their own problems getting along. Ash signs up, unaware that while he's battling, Cassidy is preparing to swipe the competitors' Pokémon! Cassidy runs into Jessie and James, and decides to make James her new team. As for Jessie, she fast-talks her way into a partnership with Butch.
Max has spotted the villains at work, however, and as Ash is celebrating a victory, he runs to tell everyone what's really happening. Our heroes go to rescue the Poké Balls and encounter Cassidy and James, James unsuccessfully trying to pretend that he's Butch. Corphish cools off Cassidy's Houndour and Team Rocket's scam is revealed to the tournament competitors, leading to a showdown with Team Rocket minions.
Jessie and Butch try to make a stealthy getaway, but Ash spots them and Pikachu puts a stop to their thievery. Meanwhile, Meowth is trying to steal a few Poké Balls for himself when it bumps into Jessie and James. They remember the good times they had together, and decide to reunite once more. So when Ash sends them blasting off, they blast off as friends—at least for now! The other Trainers are reunited with their Poké Balls, and now it's time for our heroes to head for the Pewter Gym.
After capturing Pikachu and fleeing, Team Rocket reaches a fork, and while James frantically chooses the correct path, Jessie and Meowth failed to notice Pikachu jimmying the lock open, freeing himself. After being blasted off by Pikachu's Thunderbolt, the trio gets into a heated argument. They then come to an agreement and decide to go their separate ways.
Meanwhile, Ash and his friends are heading for Pewter City. As they pass through Sable City, they notice a one-day only Pokémon Tournament being held in the town. Thinking about his upcoming battle at the Battle Pyramid, Ash decides to enter the tournament. However, what they don't know is that the tournament is a plan concocted by Butch and Cassidy to steal Pokémon. While Butch convinces the Trainers to sign up, Cassidy is disguised as Nurse Joy. Oddly enough Brock is not overwhelmed by infatuation for this "Nurse Joy". Even so, May and Brock hand their Poké Balls over to "Nurse Joy" for safe keeping during the battle tournament, unsuspecting of Team Rocket's latest scheme.
Ash's first battle is against a Pokémon Trainer named Howie. Ash sends out his Corphish to battle Howie's Pinsir. Howie has Pinsir start off with a Vise Grip, but Corphish quickly dodges. Ash tells Corphish to use Crabhammer, but Howie has Pinsir counter with Guillotine. Outside the arena, Jessie and James independently come across the battle event and decide to steal the Pokémon for themselves, though Meowth is not interested in nabbing Pokémon. Back inside the arena, Pinsir knocks Corphish hard with Seismic Toss, and is about to administer the finishing blow with Guillotine, but Ash tells Corphish to use Harden and a Crabhammer to finish it off. This move allows Ash and Corphish to win the first battle.
Meanwhile, James and Mime Jr. are wandering around the arena. They encounter Jessie, and both of them look away from each other in disgust. Later, they meet up with Cassidy, who is still dressed up as Nurse Joy. She tells the Rocket pair about the plan she and Butch have. She also reveals that she and Butch have been invited to surprise parties for Giovanni and Dr. Namba. Cassidy convinces James to help her out with the plan. Later, Jessie spots Butch carrying a box full of stolen Poké Balls and promptly recruits him, even though he is confused, to her own takeover scheme. While in the hallways of the arena, a sad Meowth is beginning to miss Jessie and James. He finds a bag of biscuits lying on the ground. He then begins to reminisce about all the times he, Jessie and James would always split the food into three pieces.
Continuing with the battles, Ash and Corphish face off against Oriba and his Marowak. Corphish is about to hit Marowak with Crabhammer, but Marowak counters with its thick bone. Marowak uses Bonemerang. Corphish ducks, but the bone comes back around and hits it. Ash has Corphish use Vise Grip, but Marowak counters and is about to nail Corphish with Bone Club. Corphish counters and is about to use Crabhammer.
Meanwhile, May's Munchlax has run off into the hallways. Max soon gets Munchlax under control and peeks into the room where he sees James and Cassidy putting stolen Poké Balls in several boxes. Max then realizes Team Rocket's evil plan, and is shocked to discover James's alignment with Butch and Cassidy. After Ash has defeated Oriba, Max signals over to his traveling group. He declares that Team Rocket has set up the tournament to steal the Trainers' Pokémon. Max directs them to the loot room, where they confront James and Cassidy. The Rocket duo recites the Team Rocket motto, but Cassidy messes up the finishing line. Then, Cassidy calls out her Houndour. Ash tells Corphish to use Bubble Beam and follow it up with Vise Grip. Before Corphish can hit Houndour, the Dark Pokémon uses Flamethrower. Corphish slams into a stack of boxes, causing tons of Poké Balls to spill out and flood the floors of the stadium.
Ash and his friends rush onto the battlefield and inform the Trainers about Team Rocket’s scheme. The tournament officials promptly tear off their disguises, revealing themselves to be a horde of Team Rocket Grunts. The Rocket Grunts bring their Pokémon forth, as do the other Trainers, not willing to give up their Pokémon without a fight. Accusing Team Rocket of stealing Trainer’s memories, Ash has Pikachu use Thunderbolt. As the battle continues, Jessie and Butch are about to leave with a box full of stolen Poké Balls, but they are noticed by Ash, who has Swellow deal with them. After being caught, Jessie and Butch recite their motto, but Butch messes his lines. Butch, after being annoyed by Ash calling him "Paunch", sends out Raticate. Pikachu uses Thunderbolt on Jessie, Butch and Raticate, sending them flying.
Elsewhere in the arena, Meowth is collecting some Poké Balls. James with Mime Jr. as well as Jessie are doing the same. When all three Rockets grab the same Poké Ball, another argument ensues, but Meowth stops the squabble by showing them the biscuit he found earlier. This reminds Jessie and James of their friendship. All three Rockets are about to split the biscuit apart. Before they could eat it, a Trainer with his Rhydon sends Jessie, James and Meowth flying. The other Grunts soon flee the building. Back inside, Ash and his friends are cleaning up the mess of Poké Balls, until they notice Cassidy and Butch escaping with a box in hand. As they chase Cassidy and Butch, the Rocket pair fall into a hole. They get out and continue to run. Before they can board their helicopter, they fall into another hole, along with the helicopter. Ash tells Pikachu to use Thunderbolt, sending Cassidy and Butch flying. Jessie, James and Meowth are floating in their Meowth balloon, carrying shovels. It turns out they were the ones who dug up the holes which almost stopped Cassidy and Butch. The Rocket trio, after reciting their motto, are about to make their getaway with the Poké Balls, until Corphish uses Bubble Beam attack, sending Team Rocket blasting off again.
Back at the stadium, Ash and his friends watch as the Trainers reclaim their Poké Balls. While in the woods, Jessie, James and Meowth are about to share a biscuit by a campfire. Jessie gets the biggest piece which immediately sparks yet another argument between the trio.