The show opens with a police boat resting near the site where the St. Anne went down. Officer Jenny, on board, sadly tells of how Ash, Misty, Brock, Jessie, and James went down with the ship and that their promising careers as Pokémon trainers come to a sudden end. She tosses a bouquet of white flowers into the sea and salutes as it sinks down. A bugler sadly plays Taps. Down at the bottom, Ash and his friends come to, and discover their plight. Ash looks out the window and sees fish swimming by. He realizes that he and is friends (as well as Jessie and James, but they don't know it yet) are trapped in the capsized St. Anne, now perched precariously on a pillar of rock, with much distance yet to go to the bottom of the ocean.
Jessie and James, meanwhile, are dreaming of a warm sunny beach. They are picturing everything, including a hot, blazing sun. They suddenly awaken to discover that it isn't the sun that's making them warm, it's a set of oven burners that got turned on during the sinking and have set their hair on fire. They run around for a few seconds until they find a couple of broken pipes spewing water, and quickly dowse the fires atop their heads. They run into the hall, only to realize that everything is upside down. Meowth explains the situation to them and James panics, trying to figure out a way to escape. Fortunately, Jessie has an idea. She sends out Ekans and has him burn a hole in the floor (or is it the ceiling?), despite the warnings from Meowth. Needless to say, when the hole is done, water comes gushing in and quickly fills with water.
Ash, Misty, and Brock are searching for a way to get out of the ship. They reach a staircase and think about which way they want to go. They realize that, since the boat is upside down, the hull is above them, and the deck is below. Ash decides that they should dive down to the decks, but Brock points out that if they reach a dead end down there, they'll be sunk (so to speak). Ash visualizes finding a locked door and drowning. This idea does not appeal to him. Misty decides to send out her Goldeen, and tells her to go down around the deck area and see if there is a way out. Instead of bringing back something from outside, Goldeen brings back the almost drowned Team Rocket.
Once Team Rocket regains consciousness, they are surprised to see Ash and his friends there. They all prepare to fight by sending out their Pokémon, but the added weight makes the boat start to rock back and forth. Misty tells them all to retreat their Pokémon or else they'll all be in trouble. They consent, and the ship balances out. Misty then convinces them all to form a truce until they get back to the surface. Ash repeats the need to get out, but Misty comforts them, saying that she knows the layout of the ship quite well, due to the fact that she once built a model of it. She says that they need to make their way to the ship's bottom and burn a hole in the hull in order to escape. Ash, Brock, Jessie, and James aren't too fond of the idea, but since they can't think of anything else, they go along with it.
They make their way to the bottom, using Onix as a staircase when needed. Finally, they come to the engine room, where the hull is thinnest. They open a door and find the next room in flames, with the path to the other door broken. Jessie and James start to comfort each other, for they believe that they are doomed. Misty tells them to knock it off, for there has to be another way across. Ash tries hard to think of ideas, and has Pikachu "jump start" his brain to see if that will help. Somehow, it does and Ash sends out Bulbasaur. He then has him extend his Vines to the other side, and they start to walk across. They tell Team Rocket to hurry up, but James is too scared. Jessie reassures him, but by the time he's ready, Ash and his friends are at the other side, with Bulbasaur. Team Rocket panics pleading with them to send the Vines back. Apparently, they do, for when we get back from commercials, they're standing with Ash.
Once they're all together again, they reach the current highest point in the ship. Ash sends out Charmander, who starts to weld through the hull. Misty tells them all to get a water Pokémon out, and tie themselves to it. Charmander finishes with the hole, and water starts to gush in. Ash quickly retreats Charmander, and brings out Squirtle. Misty uses Goldeen, and Brock borrows her Starmie. Team Rocket, on the other hand doesn't seem to have any water Pokémon. James remembers his Magikarp, and after forcing Jessie and Meowth to respect him and his genius, he sends it out. They tie themselves to it and James tells him to take them to the surface. They are enraged, however, to discover that Magikarp is a fish that can't swim. The ship fills up, and sinks down all the way to the bottom of the ocean, bringing Team Rocket with it.
Ash and his friends manage to reach the surface, and they make a raft out of the wreckage that's still floating about. They worry about Team Rocket, but not for long. Brock remembers the bible story of Noah, who released a bird to find dry land. Ash decides to do the same with Pidgeotto, and tells him to go find something. He finds something all right, but it isn't what Ash expected. Pidgeotto brings back the very dead looking Team Rocket. Ash and his friends sadly decide to give them a burial at sea, but just as they are about to push them into the water, Jessie and James, get up, frightening our friends half to death.
The two groups are now stranded with each other in the middle of the sea. They are also getting hungrier and hungrier. They notice Magikarp, still flopping around, and imagine all the ways they could cook him. Meowth leaps up and tries to take a bite out of it, but breaks his teeth in the process. Misty comments that Magikarp is only scales and bones. This is the last straw for James, he now believes the Magikarp to be truly useless, and kicks it into the water. Unfortunately for him, and the rest of our friends, Magikarp evolves into the extremely powerful Gyarados, and it looks really ticked off. James tries to control it, but he is only frightened by the huge monster.
Misty sends out Goldeen, Staryu, and Starmie. Brock asks her what her strategy is for fighting the Gyarados, but she is only using them to help tow the raft away. They all paddle rapidly, but the huge creature follows them. After a bit, he stops and starts roaring. Brock wonders if it's tired, but Misty thinks it's starting up a Dragon Rage, Gyarados's ultimate attack. Suddenly, four more Gyarados pop up, and they start to spin, creating a huge cyclone. The cyclone rips up the raft and sucks everyone up. Ash, Misty, Brock, Jessie, and James are at the mercy of the cyclone...