Appa is tired after flying for two days straight, and Sokka is getting irritable. Upon noticing the arctic sea around them, Aang and Katara realize that they are in the North Pole. After a while, they believe it to be deserted, but are quickly set upon by Waterbenders in canoes. After forcing Appa into the water and freezing the water around him, they escort Aang and his friends to the Northern Water Tribe capital. As they gaze in wonder at the great icy city and its inhabitants, Sokka spies a beautiful white-haired girl.
Meanwhile, Admiral Zhao is determined as ever to find the Avatar. In a meeting with his council, he points to a map and deduces that since the Avatar is moving north, he must be going to the Northern Water Tribe to find a Waterbending master. He organizes a massive task force to head to the North Pole and capture the Avatar.
On Prince Zuko's ship, Zhao arrives in the middle of their music night, and explains that he's taking his crew. He offers Uncle Iroh to be a general in his army, but Iroh politely declines. In Zuko's room, Zhao notices two broadswords on the wall, which look suspiciously like the ones used by the Blue Spirit who helped the Avatar escape from his fortress.
In the North Pole, Chief Arnook of the Northern Water Tribe holds a feast in honor of the arrival of the Avatar and his friends. He also announces that his daughter, Princess Yue, is 16 and of marrying age; she is also the white-haired girl whom Sokka saw earlier. While Sokka is trying to make small talk with the princess, Chief Arnook introduces Aang to his new Waterbending teacher, the stern Master Pakku. Aang also asks if Pakku will teach his friend to Waterbend, and Pakku agrees. They retire early in preparation for tomorrow.
Admiral Zhao convenes with the Pirates from "The Waterbending Scroll" and pays them handsomely for a special task to keep Prince Zuko out of the way. Uncle Iroh asks Zuko if he wants to take a walk, but he prefers sitting in his room and sulking. After Uncle Iroh leaves, the Pirates sneak onto the ship with blasting jelly. After hearing a noise, Zuko wanders around the ship and sees the Pirate Captain's parrot-lizard sitting of the mast. But he is all too late, when the pirates light the fuse and jump off of the ship as it explodes. Uncle Iroh looks in horror as his nephew's ship breaks apart.
The next morning, Aang meets Master Pakku for his Waterbending lessons. When Katara arrives, Pakku announces that his tribe doesn't teach s. Infuriated, Aang threatens to leave Pakku, but Katara relents. Pakku tells Katara that female Waterbenders are supposed to learn healing arts, so Katara joins Yaguda's healing Sokka manages to arrange a rendezvous with Princess Yue.
After the healing is over, Yaguda notices Katara's necklace and tells her asks her "who the lucky boy is". She then explains that Water tribe males carve necklaces for their brides-to-be as a sign of engagement. She then tells Katara that her Gran Gran was born in the Northern Water Tribe, and Katara looks exactly like Gran Gran Kanna at her age. She and Yaguda were also good friends. Before her arranged marriage to a young waterbender could happen, she ran away, and those that knew Kanna still don't know the reason why she left.
That night, Sokka meets Princess Yue on a bridge and gives her a carving of a fish, which she mistakes for a bear. After he tells her that he likes her, she cries, apologizes, and runs away. When they get ready for bed, Aang is angry that Pakku won't teach Katara and Sokka suggests that Aang secretly teach Katara what he learns from Pakku. They go outside and Aang teaches Katara the move he learned today, but they are discovered by Master Pakku. He refuses to teach Aang to Waterbend.
The next morning, Aang apologizes to Pakku, but Katara is furious and demands to fight him and marches outside. After striking him with a water-whip, Pakku agrees to fight Katara, and they engage in a deadly Waterbending duel. After admitting her impressive show of skill, Pakku still refuses to teach Katara and imprisons her in icicles. Upon sighting her necklace on the ground, he tells her that he carved it for Gran Gran Kanna a long time ago, having won an arranged marriage with her. He had loved her very much, but Katara surmises that Kanna did not love him. Knowing her Gran Gran, Katara tells Pakku that he lost Kanna forever because she refused to passively go along with the Northern Tribe's "stupid rules" for women; that's the reason why she fled to the South Pole. Sokka meets with Princess Yue again, who explains that she likes him, kisses him and sadly reveals the carved engagement necklace on her neck.
Uncle Iroh has tea with Zhao on his ship, and tells about Zuko's tragic fate. After explaining about the pirates, and how the Fire Lord will not be pleased, he accepts Zhao's offer to be a general in his army. After leaving the room, Iroh walks down the hall and meets a Fire Nation soldier, who is revealed to be the assumed-dead Prince Zuko. He tells Zuko that everything is going as planned, and that once they reach the North Pole, the Avatar will be his. We then see Zhao's massive armada of ships heading to the North Pole.
Back at the North Pole, Aang is about to begin his Waterbending lesson, when an exhausted Katara arrives. Master Pakku smiles and finally admits her to train under him. Aang greets her and they begin their lesson.
