Ash and his friends are traveling towards Vermilion City, making frequent stops so that Ash can battle other trainers me meets. One trainer, impressed by Ash's 10 straight wins and two badges, suggest that he challenge AJ, a very good trainer who lives nearby, and even built his own gym, although it is not sanctioned by the Pokémon League. Ash decides to do so.
When Ash, Misty, and Brock get to AJ's gym, they see a sign over the entrance proclaiming the gym as undefeated with 98 wins. AJ shows up with a backpack full of wild Pokémon he just caught. When they go in, AJ gives them to a Butterfree and Ash challenges him to a battle. AJ has no badges and says that once he reaches his 100th win, he'll start. This gives Ash the idea that he is better than AJ (since he has two). AJ, however makes fun of Ash, saying that the leaders of those two gyms must have been pretty pathetic, thus angering Brock and Misty. Ash and AJ start to fight, but unfortunately for Ash, AJ defeats him in seconds flat with his Sandshrew for his 99th win. Ash is shattered and, not accepting the defeat, starts to whine that AJ somehow rigged the match. AJ is annoyed and goes inside the large tent, telling him to grow up.
Our heroes are about to leave when they hear a whip cracking and AJ yelling at his Sandshrew from inside the tent. They rush inside and Ash attacks AJ, sending both of them into a pool. Emerging, AJ instructs Sandshrew to get back into the water. Ash says that ground Pokémon are weakened by water, but Sandshrew jumps out and spins dry, not weakened a bit. Ash then notices that the Sandshrew, as well as all the other Pokémon in the tent are wearing some sort of straitjacket type thing. AJ explains that they are "strength intensifiers" and help his Pokémon become stronger. Ash feels AJ is treating them too harshly, and appeals to Brock for support. Unfortunately for him, Brock takes interest in what AJ feeds them.
Meanwhile, outside, Jessie, James, and Meowth have seen Ash go in and plan to try to steal Pikachu again. They try out a new motto, but James frowns, saying it just doesn't feel right. They plan to hide themselves in a large rubber ball and sneak in, nab Pikachu, and escape with it before Ash realizes what happened.
As Ash and AJ talk, Pikachu tries on one of the strength intensifiers, but is overwhelmed and rolls up into a ball. Sandshrew snickers and rolls up into a ball next to Pikachu. Team Rocket rolls in and sneaks up on two. In the darkness inside the ball, they accidentally take Sandshrew instead.
Soon enough, Ash and AJ notice Pikachu's predicament and AJ frees him. Then, AJ realizes that Sandshrew is missing. Ash meanly suggests that Sandshrew ran away after seeing how much better Ash treated Pikachu. He offers the other Pokémon a spot on his team but is quickly turned down.
In the meantime, James is struggling with his bundle. It seems that the Pikachu is heavier than it looks. He is about to hand the bag over to Jessie when Sandshrew pops out, knocking both Jessie and James out. Sandshrew then burrows into the ground, bringing Meowth along.
Back at AJ's gym, Sandshrew pops out through the floorboards, with Meowth dragging behind. AJ and Sandshrew are extremely happy to see each other and they share a warm embrace. Ash starts to rethink his feelings about AJ when Pikachu alerts him of Meowth's presence. Meowth is scared until Jessie and James show up to get him back. They halfheartedly apologize to AJ, but insult him by calling his Sandshrew weak and he challenges them to a battle.
After easily defeating Ekans, Koffing, and Meowth with Sandshrew's Fissure attack, AJ gets his 100th straight win. He begins to pack up for his journey, and Ash offers to let him join his group. AJ declines, saying that he has his own path to follow, and Ash, Misty, and Brock resume their trek to Vermilion.