Katara and Aang are packing up their campsite. Aang is planning to visit the only home he has known, the Southern Air Temple. Sokka wants to sleep a bit longer. Too anxious to wait, Aang picks up a pricklestick and slides it across Sokka’s sleeping bag. Aang shouts to Sokka there’s a prickle snake in his sleeping bag. Terrified, Sokka leaps up screaming. After falling to the ground, Sokka realizes he’s been tricked but now that he’s up, they can leave.
Off the coast of the Southwest Earth Kingdom, Prince Zuko docks at a Fire Nation controlled harbor. His ship needs substantial repairs from his encounter with Aang. Zuko wants the repairs done quickly so they won’t lose Aang’s trail. He warns Iroh not to mention The Avatar during their stay so no other Firebenders will start looking for him. Zhao walks up to Iroh and Zuko welcoming them to his harbor. Zuko and Iroh learn of Zhao’s promotion from Captain to Commander. Seeing how damaged their ship is, Zhao asks how it happened. Zuko makes up a story about crashing into an Earth Kingdom ship. Curious, Zhao invites the pair of them for a drink. Zuko attempts to get out of it but Iroh speaks for both of them and accepts the invite.
Nearing the Patola Mountain Range, Sokka comments that they don’t have any food (as Aang used Sokka's blubbered seal jerky as fuel for their campfire). Katara is trying to keep Aang from getting too excited about their visit to the air temple. She tells him to expect the possibility that his people have been killed by the Fire Nation. Aang is convinced she’s wrong on the grounds that you have to fly to reach an Air Temple and the Fire Nation couldn’t possibly accomplish that. They reach the top of the mountain (above the clouds) and look down on the Southern Air Temple. Commander Zhao is explaining the Fire Nation’s planned victory to Zuko and Iroh over tea in his tent. Zuko voices his doubts that the plan will work. Zhao then asks about Zuko’s search for the Avatar, to which Zuko replies he has been unsuccessful. Zhao says he didn’t expect anything different. Zuko then gets up to leave but Commander Zhao’s guards stop him. One of Zhao’s soldiers walks in and reports that he interrogated Zuko’s crew and found out that Zuko had the Avatar but let him escape. Zuko has no choice but to tell Zhao the truth.
Sokka is still very hungry and is berated by Katara for being one of the first outsiders to see an Airbender temple and only think about food. Aang begins to give Katara and Sokka a tour of the temple but becomes disheartened almost immediately. Seeing his home abandoned he realizes how much things have changed, and in order to cheer him up, Sokka volunteers to play a game of airball with Aang. We see that airball is played much like soccer on a field composed of totem poles of various heights. The ball is propelled by Airbending and bounces off the totems into the opponents' goal, sometimes taking the opponent with it. Lying on the ground after being creamed, Sokka spots a Fire Nation helmet. He points it out to Katara and they agree to show it to Aang. When Aang begins to walk over, Katara changes her mind and covers the helmet with snow. After commenting that Katara's ability to manipulate snow is impressive, Aang wants to show them the rest of the temple. Sokka discourages Katara from protecting Aang’s feelings as she just did, to which Katara points out to Sokka that Aang would be devastated if he knew Firebenders invaded his home. They come to a statue of an Airbender monk which Aang introduces as Monk Gyatso. Gyatso was Aang’s mentor and father figure 100 years ago, Aang then flashes back to a day with him. Gyatso is teaching Aang how to make cakes and Aang isn’t listening. Aang has become burdened with the knowledge that he is the Avatar. Gyatso reassures Aang that he will be fine, that Aang must focus on the present, and that once Aang is old enough to enter the Air Temple Sanctuary, he will meet someone who will help him to become a better Avatar. Gyatso has Aang do some air bending target practice by blowing the freshly baked cakes through the air and onto the other elder monks’ heads while they're meditating. They are then pounced on by winged lemurs, slurping the cake off the monks' heads. The master and student laugh at their little prank and Gyatso congratulates Aang on his perfected aim.
Returning to the present, Aang makes for the Air Temple Sanctuary. There’s someone he’s ready to meet. Katara is doubtful that anyone has been closed off in the temple for 100 years, but Sokka hopes that the person in there has some food (particularly cured meats). To get into the Sanctuary, Aang Airbends two currents into the ornate locking mechanism causing it to open the doors. Aang then calls out, "Hello" and begins to walk into the darkened temple with Katara and Sokka following him. All three of them block an air current running under the floor of the Sanctuary which causes a humming noise.
Commander Zhao is appalled that a twelve-year-old boy bested Zuko and his crew. Zuko passionately states that he is going to hunt the Avatar from now on and shall not underestimate the Avatar again. When Zhao replies that he will be taking over the hunt for the Avatar, Zuko leaps for Zhao in a rage but is held back by the guards. Zhao orders for Zuko and Iroh to be kept in his tent and leaves. In anger, Zuko kicks a table as Iroh asks for more tea.
The Air Temple Sanctuary is filled with hundreds of statues, and Sokka (still hungry) is thoroughly disappointed at there not being any food. Katara and Aang notice a pattern in the line of the statues. They're arrayed in the Avatar cycle (Air, Water, Earth, and Fire). From that Katara figures out that these are statues of previous incarnations of the Avatar, Aang’s past lives. Aang singles out the last statue in the line and gazes into the statue’s eyes, going into a kind of trance. A gentle shake from Katara breaks him out of the trance, at which point Aang knows the statue is of Avatar Roku, the Avatar before him. Sokka recognizes Roku as a Firebender by his robes and top-knot. The three of them hear the humming noise from the entrance indicating that someone else has just come in. Preparing to fight a Firebender, they reveal themselves to see it’s just a lemur. Desperately hungry, Sokka wants to eat the lemur for dinner. Aang on the other hand wants to keep the lemur as a pet. This prompts a race to see who can catch the lemur first. Katara stays behind in the Temple Sanctuary while Aang and Sokka run after the lemur, each trying to trip the other up. As it turns out, the lemur can fly, and Aang jumps off the balcony of the temple in his determination to catch the lemur. Commander Zhao and his search party are almost ready to set sail on their search for the Avatar. Zhao will then release Zuko when his ship is out at sea. Zuko states forcefully that he is going to capture the Avatar before Zhao, who laughs at the thought. How can a banished prince compete with a resourceful commander with hundreds of warships at his disposal? Zhao then demeans Zuko by telling him that his father would let him come home without the Avatar if the Fire Lord really loved him. Zhao states that all Lord Ozai sees in his son is failure. Zuko challenges Zhao out of pure rage and disgust to an Agni Kai at sunset, to which Zhao accepts. After Zhao leaves the tent, Iroh reminds Zuko about how his last duel with a Firebending master turned out. Zuko responds; "I will never forget".
After landing safely, Aang follows the lemur and discovers a room where there lay many Fire Nation soldiers’ bodies, centered around the skeleton of Monk Gyatso. His laughter stops. His former master and father figure gone, Aang starts to cry. Sokka finally catches up to Aang and questions whether he caught the lemur, going on to say that he didn't actually intend on eating it. It isn't long before he sees what has made Aang so upset. As Sokka tries to comfort Aang, he suddenly goes into the Avatar State and creates an Air Sphere around himself, violently blowing Sokka backwards.
Back in the temple, Katara observes that all the Avatar statues’ eyes begin to glow in the same brilliant white as Aang's tattoos. Realizing Aang must be the cause of this, she runs out to find the boys. In this moment, the Water, Earth, and Fire Nation Temples simultaneously experience a similar event, Avatar statues and murals start to glow. In the Fire Temple, the fire sages hasten to inform the Fire Lord that the Avatar has returned.
After finding a windswept Sokka, Katara is informed that Aang found out that fire benders killed Gyatso. Aang’s anger has escalated so that he now floats within his Air Sphere. Katara then makes her way toward Aang in order to calm him down.
It is sunset and Commander Zhao and Prince Zuko are ready to duel. The two combatants begin back to back. Iroh counsels Zuko to remember his basics as they are his greatest assets, but Zuko doesn't appear to heed his uncle's wisdom, instead simply stating that he will not lose and assumes his stance. Zhao claims that the duel will end swiftly, and also assumes his stance. The two opponents stare deeply and fiercely into each other's eyes. The gong sounds and the match commences. Zhao seems more than a match for Zuko, effortlessly avoiding and nullifying all of Zuko's fireblasts. As he catches his breath, Iroh continues to advise Zuko to remember his basics. Zhao then proceeds to throw his own volley of fireblasts. Zuko is able to block each, but is slowly forced back with every parry. For the final blast, Zhao uses both fists, forming a blast that connects and knocks Zuko to the ground. Pressing the attack, Zhao leaps into the air, covers the distance between him and Zuko, and prepares a finishing fireblast aimed directly for Zuko's face. An instant before contact, Zuko rolls out of the way, rises with a kicking flourish, and knocks Zhao out of his stance. With newfound vigor, Zuko releases a series of low attacks that cause Zhao to retreat, finishing him with a jet of fire from a full body kick. Zhao expects Zuko to strike him once more, to mark his victory, but Zuko releases a fireblast past Zhao’s face instead, promising next time Zhao is in his way, he will not hold back. As he turns to walk away, enraged by his defeat, Zhao sends a jet of fire at Zuko’s back, which Iroh swiftly stops with his bare hand. After throwing Zhao to the ground, Iroh lectures Zhao about how dishonorably he has acted, and that his nephew is more honorable even in exile. Iroh is still polite enough to thank Zhao for the tea. After leaving the arena, Zuko asks Iroh if he really meant what he said back there, to which Iroh responds: "Of course. I told you ginseng tea is my favorite". As the two walk back towards the ship, the faintest of smiles crosses Prince Zuko's lips.
At the Air Temple, Katara attempts to console Aang by imparting how she felt when she lost her mother, and even goes on to state that even though his people are gone, both she and Sokka are now his family. The words seems to reach Aang, who falls out of the Avatar state and slowly descends back onto the ground. Sokka backs Katara's statement with the promise that neither will let anything happen to him. With this, Aang finally comes to the conclusion that he is indeed the last of his kind. Just before they leave, Aang stands before Roku’s statue once more, wondering how his past life can help him if he is dead. Suddenly, the lemur reappears with a variety of fruits and lays them in front of Sokka, who doesn’t waste any time wolfing them down. The lemur then climbs onto Aang’s shoulder, possibly bonding with him because of his Airbender tattoos. After realizing that the lemur, Appa, and he himself are the last survivors of the Southern Air Temple, Aang names the lemur Momo, the newest addition to their family. Night falls as the gang flies off on Appa. Deep with thought, Aang takes one last gaze at his old home before it fades behind the clouds.