Continuing through a winding valley, Ash notices a small town up ahead. Brock reads his guidebook and declares that it is the township of Eggseter. Suddenly Gary on a pulled skateboard by his Arcanine passes by. Ash calls out to his rival and challenges him to a battle. Gary, however, declines. He explains that he and Arcanine are entering the Extreme Pokémon Race before rushing off to continue his training. Ash and his friends give chase, and watch in amazement as other Trainers also practice.
Later, the group stops off in a restaurant. Misty notices that Ash is still not satisfied, and he admits that he is worried about the collar around Arcanine's neck. A man, Mr. Shellby, overhears the conversation and explains that Extreme Pokémon is a popular sport. With the mention of competition, Ash is determined to beat Gary in the upcoming Extreme Pokémon competition. Mr. Shellby offers to assist. During a Tauros cart ride, Mr. Shellby explains that he operates a local Pokémon Day Care Center, responsible for raising young Pokémon from Eggs. The group soon arrives at Mr. Shellby's home and meets his wife Kimie. The group looks around the home and see shelves full of Pokémon Eggs, and they also meet some of the new hatchlings. Mr. Shellby then shows Ash to his old skateboard and lends it to him for the upcoming race. Ash rides down the sloping hills on the property and admits that he used to mountainboard back in Pallet Town.
During his practice, Ash hits a rock in his path, though Arcanine comes to his rescue. Gary spots the skateboard and realizes that Ash is also entering the race. Ash is confident that he will win, and the rivals vow to do their best. Later, Ash considers which Pokémon to choose. Pikachu is keen to compete, though Ash selects Bayleef, hoping her strength will help him win the race. As he and Bayleef practice, Meowth spots them through his binoculars. He turns around but is forced to shout to wake his teammates up. James reveals that he received a pamphlet advertising a Pokémon race. Meowth glances through and realizes that Ash must be training for the event. The thought of strong people instantly excites James and Meowth, but Jessie declares that they will just steal the winner to avoid further complications.
Meanwhile, Brock test tastes Kimie's homemade Pokémon food and is impressed by its quality. Misty watches as Pikachu and Togepi enjoy the food as well. Mr. Shellby interrupts Ash's practice to alert him to another condition of the race. He hands Ash a dummy Egg, which will be needed for the final leg of the race. The new addition takes Ash by surprise. Ash then returns to his training session, now with the dummy Egg in hand.
On the day of the Eggseter Extreme Pokémon Race, the announcer explains that the competitors will make their way through the winding Eggseter Valley however they like, where the Shellby Ranch marks the first stop. Participants must then pick up a dummy Egg and race back to the starting line, concluding the event. The race begins at a rapid pace. Soon, a Trainer's Scyther soars into the air, knocking several contestants off their boards. Several competitors including Gary and Ash emerge from the subsequent dust cloud and continue racing ahead. Gary and Arcanine take the lead during the mountainous section, and soon Ash catches up. Team Rocket floats overhead in their Meowth balloon and sends down a net that captures Gary's Arcanine. Ash commands his Bayleef to launch him at the balloon, and he uses his skateboard to pierce it. Ash lands with the balloon, Team Rocket, and Arcanine at Mr. Shellby's house. As Arcanine escapes from Team Rocket, James steals baskets of Pokémon Eggs from Mr. Shellby. Jessie sends out her Arbok to defend the team as they escape, but Bayleef appears and battles Arbok. Arbok's Poison Sting overpowers Bayleef, but Gary arrives just in time and commands Arcanine to Take Down Arbok. Team Rocket resorts to running away, but Ash's Bayleef reclaims the Eggs using her vines, and Team Rocket is sent blasting off by Arcanine's Flame Wheel.
Ash and Gary are still in the lead, but the rest of the competitors are catching up. They are given their dummy Eggs by Mr. Shellby and continue the race. Gary is slightly ahead of Ash on the return. Ash then spots an overhanging cliff, and he uses it as a ramp to catch up to Gary. With the finish line in sight, Gary has Arcanine speed up. Ash orders Bayleef to do the same, and she whips herself to make the leap forward. Her head is narrowly ahead, making for a photo finish victory for Ash. Gary is at first annoyed but takes it in good faith. Ash stands proudly on the winner's podium with the Golden Poké Ball trophy in hand, and Bayleef next to him with her own medal. Gary later congratulates Ash on the victory before waving goodbye.
Mr. Shellby and his then approaches Ash. They give him a light blue Pokémon Egg as a present. Misty is curious about what is inside, but Kimie whispers that it is a secret. Mr. Shellby explains that the Poké Ball on top of the Egg case should be used to catch the new hatchling. The Day Care couple waves as the group then set off towards Mahogany Town once again.