Ash, Misty, and Brock take a rest in Cherrygrove City. After polishing his Poké Balls and the mysterious GS Ball, Ash leaves them by the river as he runs to eat, just as a Quagsire appears from the water. Misty attempts to catch it, but Psyduck comes out and appears to have a mental connection with Quagsire. As Misty tries to get Psyduck's attention, Quagsire steals the GS Ball and swims away. Ash sends out Squirtle to chase it down; it uses Water Gun, which causes the GS Ball to slip out of Quagsire's mouth, and Pikachu is able to catch it on the shore. While both Quagsire and Squirtle are using Water Gun against each other, Misty tries once again to catch it. Before she could throw the Poké Ball, however, Officer Jenny stops them and arrests them for violating the Quagsire Preservation Restrictions.
At the police station, Jenny drops the charges after making a call to Professor Oak, who explains that he forgot to mention the restrictions to the group. Jenny explains that the Quagsire are very special to the people of Cherrygrove City because they help identify the cleanest water in the area. She reveals that Quagsire took Ash's GS Ball because it was round. At the same time every year, the Quagsire swim down from their home at Blue Moon Falls and take round objects, swim upstream to with them, and then send the objects down the river again. They are said to be good luck, especially the last object to float down the river.
Ash then sees another Quagsire outside the station, staring at his GS Ball. Ash defends the GS Ball, and the Quagsire retreats. Ash and his friends leave the station and walk along a bridge to continue their lunch. However, they find themselves confronted by yet another Quagsire. It pleads with Ash for his GS Ball, but after Ash rejects it, Quagsire jumps on him to retrieve it. In an attempt to get Quagsire off him, Ash sends out Chikorita, who successfully knocks it away by spinning the leaf on her head. It is then discovered that Chikorita has a crush on Ash. Quagsire comes up from behind Ash, and Chikorita knocks it off again. In the process, however, the GS Ball falls out of Ash's backpack and Quagsire manages to catch it before it swims upstream with it. Elsewhere, Team Rocket has lost track of Ash and his friends, so James is trying to map out where they might be. Jessie notices that Meowth is playing with a glass ball, and Meowth tells her that he found a lot of items in a field nearby. The three are startled by a Quagsire who comes and takes the lawn ornament from Meowth. Jessie, annoyed that it took away Meowth's toy, tries to send out Arbok and Lickitung, but two more Quagsire take her Poké Balls before she can send them out. The same happens with James's Weezing and Victreebel.
Ash's party, with Team Rocket unknowingly trailing behind, chases after their stolen Poké Balls. While resting on a rope bridge, Pikachu spots a quartet of Quagsire carrying various round objects, so Ash and his friends continue to follow them upstream. They soon stop at a lake, where a horde of Quagsire have also stopped swimming upstream. Ash spots the Quagsire with the GS Ball, and is intent on catching it. After Misty and Brock remind him of Jenny's earlier intervention, he decides to keep an eye on Quagsire instead. On the other side of the pond, Team Rocket spies on them and devises a plan to catch Pikachu and the Quagsire.
Ash and his friends notice the Quagsire are all staring into the sky, waiting for something to happen, but Team Rocket arrives on the scene. They snatch a Quagsire with a claw installed on their hot-air balloon, and recite their motto. However, the Quagsire easily slip from the metal claws due to their slippery skin. To combat the unexpected problem, Team Rocket casts a net over the school of Quagsire, but just as they begin to fly away, Jessie remembers that they still don't have their Pokémon. She soon spots their Poké Balls, and is furious that the Quagsire threw them on the banks amongst some rubbish. Team Rocket retrieves their Pokémon and catches Pikachu with the claw, but before they can flee, some of the uncaught Quagsire begin to hurl rocks at Team Rocket's balloon, which causes the claw to drop Pikachu. With Pikachu back, Ash sends out Bulbasaur to use Razor Leaf on the net. After the Quagsire are released, a large rock punctures the balloon, sending Team Rocket blasting off.
Without any further distractions, the Quagsire continue staring at the sky, and something triggers them to start swimming upstream again. Ash's group follows and finds the Quagsire at Blue Moon Falls, where they see that tonight, the moon is actually blue. Then, the Quagsire throw their objects into the air and use Water Gun on them to send them flying over the waterfall, and then flow back down. Brock suggests that they do this as a competition to see who can get it closest to the moon. The Quagsire with Ash's GS Ball shoots it than the others. Then, the GS Ball comes down and begins to flow downstream, where Ash instinctively rushes after it. Back in town, the rest of the townsfolk gather their belongings as they float down the river. Ash's GS Ball floats down the river as the last item, which Jenny scoops up and hands to Ash as he catches his breath.