Ash and his friends are walking near Mahogany Town when all of a sudden Pikachu feels sick, followed by Togepi. Brock looks at the surroundings and declares that they must be lost. Several Bug Pokémon suddenly drop down from the trees, which frightens Misty, but they appear sick too. As they wonder what is happening, a large roar attracts their attention. The group reaches the banks of the Lake of Rage. All of a sudden a Red Gyarados appears from the water, startling everyone. Within moments of its appearance, Gyarados fires out a Hydro Pump towards the group, which misses. Ash and the others conclude that Gyarados must be sick as well, so they decide to leave the area.
The group is halted by some members of Team Rocket. Tyson doesn't want his plans ruined and he sends out a Fearow to take care of them. Ash calls on Totodile, though it is unable to attack because of a wave of weakness that hits. Fearow is seemingly unaffected. It dives in with a Drill Peck, but a Thunder Wave strikes it down first. A Dragonite and its Trainer arrives on the scene. He orders Ash and the others to move away, and the group follows orders. Tyson and his Team Rocket Grunts go to pursue them, but Dragonite delivers a powerful Whirlwind to keep them at bay. The Trainer flies off on his Dragonite and meets up with Ash's group in the forest. Misty notices that the man seems familiar, and the group quickly recognizes him as Lance, the Pokémon League Champion. The Trainer confirms that he is Lance and reveals that he is part of the Pokémon G-Men, a detective organization that seeks to catch people misusing Pokémon. Lance mentions that the Red Gyarados has something to do with Team Rocket’s latest operation at the Lake of Rage. Ash is keen to assist, which Lance politely declines. He explains that it would be too dangerous for Ash, especially since the Team Rocket members are no ordinary grunts. Lance directs them to a path that will lead to Mahogany Town and wishes them all the best.
The Team Rocket trio have found themselves lost in the same forest and are becoming increasingly weary from hunger. Meowth turns to his left and spots what he thinks is a farmhouse. Jessie is energized again and declares that they will raid the farmhouse of its food. The building, however, is actually a Team Rocket HQ. Inside, Tyson congratulates Professor Sebastian on another successful operation. The Professor is not so optimistic and declares that the Red Gyarados has been the only one to evolve from the radio wave technology. He declares that it must be captured for further study to perfect the radio wave technology. However, their radar indicates that the Red Gyarados is in the deepest part of the lake, meaning it must be lured to the surface. A Grunt interrupts the conversation and alerts the pair to some intruders. Upon further inspection of the security systems, Jessie, James, and Meowth are caught on camera. While the trespassing trio walks through a hallway, they stop to examine some peculiar Persian statues. James touches one on the head and this triggers a cage trap. Tyson confronts the caught intruders and demands to know their identities. Jessie and James perform their motto to clarify their names. A Grunt informs Tyson that the central database confirms that Jessie and James are in fact a part of Team Rocket, but have been demoted to rookie rank for making zero contributions to the organization. Tyson reads that the trio will do anything for a meal, so he decides to recruit to help complete “Project R”. They leave Jessie, James, and Meowth to enjoy some food before introducing them to Professor Sebastian. The Professor and Tyson set the trio the task of retrieving the Red Gyarados from the Lake of Rage. Tyson mentions that it is a historic project, and the prospect of Team Rocket infamy leads the trio to accept the task.
Back at the base, a boat is prepared for the operation to begin. Just behind one of the docking hangers, Lance hides and waits for a chance. An unsuspecting Rocket grunt walks by and Lance grabs him, takes his uniform and boards the boat disguised. Team Rocket's vessel travels to the center of the Lake of Rage, where Jessie and her teammates follow orders and proceed to dive in to retrieve the Red Gyarados. Jessie orders James to swim 70 meters towards the target, and he begins without any questions. James turns back a moment later and notices that Jessie and Meowth are remaining behind. An argument breaks out among the trio. Soon enough, an angry red Gyarados comes towards them and Jessie, James, and Meowth swim back to the surface. Tyson is pleasantly surprised by the trio’s assistance and readies his crew to make the capture. As soon as the target is in sight, a Team Rocket member fires a net gun which ensnares the Red Gyarados and the Rocket trio. Professor Sebastian gives a signal and a power shock is delivered through the netting, shocking both Gyarados and Team Rocket.
Ash and his friends return to the Lake of Rage, and their concerns for the Red Gyarados are confirmed. They arrive on the scene just as Team Rocket drag their catch back to their base. Ash sends out Totodile, and Misty calls on Poliwhirl. They both swim to the net, and Totodile chomps the net and Jessie's hair, while Poliwhirl tries to rip it. Lance notices them, thinking Ash is crazy. Seeing the two Pokémon, Sebastian radios in for another device, which triggers a giant radar back at Team Rocket Headquarters that sends waves out towards the area. Soon Totodile and Poliwhirl become tired and let go of the net. As Misty and Ash recall their Pokémon, they again notice that Pikachu and Togepi appear sick again. Brock realizes it's something at the HQ that's doing this. Before they can act, Tyson catches the group with restrictive rings and delivers them directly to Sebastian. Ash demands to know what's going on and what are they going to do with the red Gyarados. Sebastian explains the whole concept behind Project R, short for Project Revolution. While the Red Gyarados was the only Pokémon to evolve because of the inducement wave, Sebastian thanks the kids for helping him realize that the technology was also a powerful weapon. He reveals that the aim of Project R is to force Pokémon into evolving to create an army of powerful Pokémon at their disposal. While Ash and his friends are furious, Sebastian’s spiel also offers Lance a lot of insight into Team Rocket's upcoming plans. To avoid any more complications, Tyson locks Ash and his friends behind bars.
Later Tyson congratulates Jessie, James, and Meowth for their work, and he rewards their efforts with an endless supply of food. He also orders them to look after the base. Soon after, the Gyarados is loaded into a truck and Team Rocket leaves in a transport convoy which Lance is on, along with Tyson and Sebastian. It drives off, leaving the lake, as well as Ash and his friends, behind.