After Zuko is severely injured by a shot of lightning from Azula during their Agni Kai, Katara must face her alone. Sokka and Toph are separated from Suki while attempting to destroy the air fleet, and soon find themselves outnumbered. Meanwhile, fighting a losing battle against Ozai, Aang enters the Avatar State, and must finally decide whether or not Ozai must die in order to end the war.
Having decided to split up, Zuko and Katara head to the Fire Nation in order to stop Azula, who has become extremely paranoid and power hungry since becoming Firelord, once and for all; while Sokka, Toph, and Suki head to stop the air ship fleet that will destroy the Earth Kingdom. Both groups find their tasks harder than they expected. Meanwhile, Aang faces off with Ozai, but finds himself overwhelmed by the immense power he has gained from Sozin’s Comet. Elsewhere, the Order of the White Lotus battles for the freedom of Ba Sing Se.
After June is unable to track down Aang, the gang decides they must find the only other person alive who could help them defeat the Firelord; Iroh. They find him on the outskirts of Ba Sing Se, where he has gathered the Order of the White Lotus, an ancient society which transcends the division of the four nations, to free Ba Sing Se from the Fire Nation. On the island, Aang seeks guidance from his past lives, but is not happy with their advice. Soon after he discovers that he is not on an island at all, but on the back of a Lion Turtle, whose advice aids him greatly.
After learning that the gang assumed they could face the Firelord after Sozin’s Comet had passed, Zuko reveals to them that it must be done before the comet arrives, as Firelord Ozai plans to use it’s power to wipe out the earthbenders completely just as Firelord Sozin did to the airbenders a hundred years ago. To make matters worse, the comet is arriving in three days. Aang begins to struggle with the fact that he will have to kill Ozai in order to stop him, something he feels he cannot do. In the middle of the night he awakens in a trance, and swims out to a nearby island. Unable to find Aang the next morning, the gang travels to the Earth Kingdom to find June, who they know can help track him down. Elsewhere, knowing that after the Earth Kingdom is finally destroyed he will rule the entire world, Ozai appoints Azula the new Firelord, and gives himself a new title; “The Phoenix King”.
The gang is forced to look at themselves from a third party view after watching a play about their adventures, and don’t like what they see. Mainly Zuko, who regrets betraying his uncle, and Aang, who is unsure where he stands with Katara.
Feeling as though Katara’s hatred for him is somehow deeply rooted in the death of her mother, Zuko asks Sokka to explain how she died. After hearing the story, Zuko realizes he knows who killed her, and takes Katara off to find him. Aang worries that once face to face with the murderer, Katara will do something she will later regret.
Staying at Boiling Rock an extra day ends up paying off, as Hakoda does turn out to be one of the incoming prisoners. Now with him in their plans, they devise a second escape, which seems to work perfectly, until Azula, Mai, and Ty Lee arrive.
Feeling guilty and responsible for the capture of the invasion force, Sokka asks Zuko to help him attempt to free some of their imprisoned allies. Together they travel to Boiling Rock, the Fire Nation’s most secure prison, in hopes of rescuing the others. Once there they discover that war prisoners are not sent to Boiling Rock, but are happy to find Suki. They hatch a plan to escape but must second guess it when the time comes, as they find a new batch of prisoners are arriving the next day, one of whom may be Hakoda.
While teaching Aang the basics of firebending Zuko discovers that his own firebending has grown severely weaker. After some thought, he realizes that this is because he is no longer filled with anger and hatred, which used to fuel his fire. In order to discover the true, original source of firebending, him and Aang travel to the ruins of the Sun Warrior Tribe, which consisted of the first humans to learn firebending. Once there, they quickly discover they are not alone.
Aang and the crew flee the Fire Nation heading to the Western Air Temple after the failed invasion attempt in order to regroup. Zuko follows the gang after he discovers his true destiny, and attempts to join them. The gang, however, is not so accepting of him.