Aang and his friends rest at an Earth Kingdom outpost after their journey from the North Pole. They are to be escorted to Omashu, where Aang intends to find King Bumi to teach him earthbending. General Fong, however, inspired by Aang's battle-determining actions during the Siege of the North, suggests that Aang defeat the Fire Lord and end the War immediately by triggering the Avatar State. After many failed attempts, the general finally succeeds in triggering the Avatar State by faking Katara's death. Aang nearly destroys the base in anger and the group decides to go to Omashu alone. In the meantime, Zuko and his uncle are visited by his sister, Azula, who has come bearing a message from the Fire Lord, requesting their return home. Zuko and his uncle discover Azula's summons to be a disguise in order to imprison the pair and escape.
In a dream, Aang wanders the ruin of the Southern Air Temple. Finding the statue of Monk Gyatso, he discovers that the statue has changed, having morphed into a doppelganger of himself in the Avatar State. As Aang sees Sokka and Katara huddling behind a rock, his doppelganger attacks him, throwing him backward. He finds himself in the Fire Nation Avatar Temple; as the doors to the inner sanctum open, the doppelganger appears within, splitting the floor and causing Aang to fall through the crack. Landing on the deck of a Fire Nation ship, he looks up, finding himself face to face with the doppelganger, which has fused with La and taken the form of a giant koi fish. As the monstrous creature slashes at him, Aang wakes up, horrified and gasping.
Realizing that he was having a nightmare, he quietly leaves the hammock in which he was sleeping, albeit not quietly enough to keep from waking Katara. Moving upward to the deck of the Water Tribe ship, Aang stands by the side of the ship; following him, Katara stands next to him, asking him if he wants to talk. Aang confides to her his nightmare, and tells her that the power of the Avatar State is not just terrifying for others: it terrifies him as well. The next morning, Pakku gives them parting gifts for their journey to the Earth Kingdom base, where they will be escorted to Omashu. Katara is given an amulet filled with water from the Spirit Oasis, and Aang receives waterbending scrolls; Sokka, hoping for a gift as well, gets a disappointing pat on the shoulder and a casual "Take care, son."
Elsewhere, Iroh is relaxing and getting a massage at a beautiful spa resort. Zuko however, is unhappy, as it is the three-year anniversary of his banishment from the Fire Nation, and he reiterates to Iroh his desire to reclaim his honor, the throne, and his father's respect. Iroh conjectures that the Fire Lord does care, happily explaining his reasoning by saying, "Why would he banish you if he didn't care?" This does not sit well with Zuko, who angrily leaves; Iroh is left to ask the masseurs, "That came out wrong, didn't it?"
At sea, a Fire Nation ship carrying Princess Azula nears the Earth Kingdom, where she has been tasked with the capture of her brother and uncle. When the captain informs her that the tides will not allow them to enter the port on time, she threatens his life, asking him to decide whether to obey the tides, "... who have already made up their mind about killing [him]," or herself, "who is still mulling it over."
Aang and his friends arrive at the Earth Kingdom base and are greeted with honor, as their deeds at the North Pole have become well-known. General Fong, the leader of the garrison, describes the wonder of Aang single-handedly destroying a Fire Nation fleet. Fong believes with such power, Aang is now ready to face the Fire Lord and end the Hundred Year War. Panicked, Aang believes that he is certainly not ready, explaining he was only able to do what he did because of the Avatar State, which he cannot enter willingly. After showing Aang the earth army infirmary, housing all the soldiers who were hurt by the War. Fong asks Aang to ponder an offer: allow him to help Aang gain control of the Avatar State.
On her ship, Azula is practicing lightning generation, a highly advanced form of firebending. Her royal advisers, Lo and Li, watch her progress and remark she is close, but not perfect: "One hair [is] out of place." Azula angrily remarks that "almost [perfect] isn't good enough" and continues practicing, firing a bolt of lightning into the sky. Hearing the thunder from some distance away, Iroh wakes and looks around, concerned.
That night, Aang goes to meet Fong, accepting his offer; returning to the room in which Katara and Sokka are sleeping, he informs them of his choice. While Sokka agrees, seeing it as a simple, obvious shortcut, Katara is very much against it, believing Aang needs to keep mastering the elements in the proper manner. Aang tells her to be realistic, believing that he does not have the time to learn all the elements "the right way," but she becomes upset and leaves the room, refusing to be a part of the plan. The next day, Fong begins testing Aang, attempting to trigger the Avatar State. First, he serves Aang a special herbal tea which increases energy ten-fold in soldiers, but it only gives Aang an energy rush. Sokka tries to scare Aang into the Avatar State, but it does not work. Fong organizes a ritual in which Aang wears clothing from all four nations and is bathed in all four elements, but it only makes him sneeze.
Azula finds Iroh and Zuko at the resort and pays them a friendly visit, though both of them are suspicious of her intentions. She tells them the Fire Lord, owing to various rumors of treachery and subversion in the Fire Nation, regrets banishing his son; he wants Zuko to come home. Zuko is dumbstruck by the news, and Azula departs, requesting that they make their choice, and inform her of it, by the next morning.
At sunset, Katara finds Aang on a balcony; she lets Aang know that, for those people who care about him, watching him while he is in the Avatar State is a frightening experience. As grateful as he is to know that Katara is concerned about him, Aang stands by his decision, still believing that what Fong is doing is right. Aang faults himself for being unable to stop the Hundred Year War, and feels that he must try to do something about it. A saddened Katara, then leaves, telling him she will no longer watch their attempts to induce the Avatar State, saying, "I can't watch you do this to yourself."
That night, Zuko is overjoyed by the news that his father wants him to return home. Iroh is suspicious of the news, having never known the Fire Lord to be regretful of anything, and warns Zuko that things are never what they seem in their family. Zuko, upset by Iroh's assertion, angrily insults his uncle, accusing him of being jealous of his younger brother.
Dreaming again, Aang has another nightmare: on Zuko's ship, Aang's Avatar State doppelganger rises out of the ocean on a column of water. Descending to the deck, it hurls the real Aang off the deck with waterbending before assaulting Zuko. Aang awakens no less terrified than before, and, waking a sleeping Sokka, tells him that trying to force the Avatar State out of himself is a bad idea. When Aang asks Sokka if General Fong will be upset by his change of heart, Sokka casually replies, "What can he say? You're the Avatar. Who knows better than you?"
The next morning, Zuko makes his way to the port. Initially alone, he is soon joined by Iroh, who has apparently changed his mind. Iroh tells Zuko that "family sticks together", and Zuko smiles happily, but as they head for the ship, Iroh glances at it warily.
Aang explains to Fong that he is done testing himself, expressing the belief that the Avatar State can only be triggered when he is in genuine danger. Fong, still bent upon inducing the Avatar State, then assaults Aang with earthbending and orders his soldiers to do the same. Aang, unwilling to fight the soldiers, manages to evade their attacks, while unsuccessfully trying to persuade them to stop attacking.
At the port, Azula warmly welcomes her brother and uncle, and they all board the ship. Azula tells the captain to "set a course for home", and the ship's captain, in a moment of absentmindedness, orders the crew to "raise the anchors," as they are "taking the prisoners home." Iroh, Zuko, and Azula all catch the word "prisoners", which serves to reveal Azula's true purpose: return Zuko and Iroh to the Fire Nation to be imprisoned. Zuko attacks the captain, throwing him overboard; as Iroh fights the ship's guards, Zuko confronts Azula.
As Aang continues to run from the earthbenders, Katara and Sokka, realizing what is happening, help defend Aang. However, General Fong captures Katara with earthbending and, in a last-ditch effort to induce the Avatar State, earthbends the ground beneath her, causing her to sink into it. As Katara is slowly swallowed by the earth, Aang begs for Fong to release her, but Fong refuses to relent, and her scream of terror is cut off as he completely buries her. Enraged, Aang enters the Avatar State; this delights Fong, but Aang immediately begins to devastate everything around himself indiscriminately.
Zuko fights Azula, but he is not skilled enough to match her. She taunts him, saying their father considers him a miserable failure and a liability; he would prefer that Zuko rot in prison, rather than allow him to further embarrass himself and the Fire Nation. Furious, Zuko renews his attacks, but he is eventually thrown harshly to the bottom of the stairs leading to the hold. As Azula prepares to kill a defenseless and disoriented Zuko with lightning, Iroh abruptly interrupts her, redirecting the blast into the nearby cliffside, where it causes a large explosion.
Back at the base, Fong releases an unharmed Katara, yelling that her disappearance was merely a trick to trigger the Avatar State; Aang does not respond, and he continues to destroy the base. Avatar Roku suddenly appears to Aang, taking a projection of Aang's soul with him; he wishes to explain to Aang the nature of the Avatar State. According to Roku, it is a defense mechanism designed to empower the Avatar with the skills, power, and knowledge of all his past lives. He also warns that, while its power is undeniable, it possesses a glaring weakness: if an Avatar were to be killed while in the Avatar State, the reincarnation cycle would be broken and end, destroying the Avatar.
Returning to his own body and leaving the Avatar State, Aang is distressed by the destruction he has caused, but General Fong is gleeful over having succeeded in inducing the Avatar State. Aang tells him he is insane, and Fong decides they can "figure [everything else out] on the way to the Fire Nation"; Sokka then knocks Fong unconscious with his club, and asks the remaining soldiers if they have any qualms about his actions. Not one of them raises an objection, and Team Avatar subsequently departs on Appa for Omashu by themselves, unassisted by Fong's shell-shocked soldiers.
Back in the resort village, Azula holds up a wanted poster, on which are the faces of Zuko and Iroh, and viciously warns the villagers that "anybody who harbors these traitors will face the wrath of the Fire Lord."
Zuko and Iroh, having escaped Azula's guards, stop to rest near a small creek. As a symbol of severance from their family and the Fire Nation, the pair cut off their top-knots and place them in the creek, watching as the current slowly washes them out of sight.
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- Main article: Transcript:The Avatar State
- Main article: Writing in the World of Avatar
- Main article: Avatar Extras for Book Two: Earth
- During his dream, Aang sees himself entering the Avatar State in "The Southern Air Temple" and "The Siege of the North, Part 2".
- This marks the second time that Aang has nightmares, the first being in "The Storm".
- The significance of the dagger Zuko and Iroh use to cut off their topknots is examined in detail in "Zuko Alone".
- The line of Avatars that disappear while Roku is warning Aang reappear, in reverse of how they disappear in this episode, in "Sozin's Comet, Part 4: Avatar Aang" when the final chakra is finally unblocked and Aang masters the Avatar State.
- Lightning generation is first introduced, though lightning redirection was first suggested in "The Storm".
- This is the first time that Aang entered the Spirit World without meditating.
- This is the first known time that an Avatar went into the Spirit World while in the Avatar State.
- This is the first time Avatars Kuruk, Yangchen, and the unnamed fire Avatar are shown.
- This is the first time Sokka is seen with his hair down.
- This is the last time Zuko is seen in the present with the hairstyle he wore throughout season one.
- Iroh is seen redirecting lightning for the second and final time. He would later teach the skill to Zuko in "Bitter Work", who in turn would teach it to Aang in "Sozin's Comet, Part 1: The Phoenix King".
- This is the first episode in which Azula is seen speaking. The character had brief appearances in "The Storm" and "The Siege of the North, Part 2" without any lines.
- During Aang's first dream, he is seeing the events that took place while he was at the Southern Air Temple, but the dream is shown occurring at the Northern Air Temple.
- While Aang is dreaming at the start of the episode, one can see that his shadow has a faint arrow tattoo on its head, the same Aang has to represent mastery over airbending.
- In Aang's dream, while fighting Zuko, Aang is in the Avatar State, but toward the end of the dream, his tattoos and eyes are not glowing like they should be.
- When Aang, Katara and Sokka are in the general's quarters for the first time, there are only two guards on either side of the door. When the camera zooms in on Aang, there are about ten soldiers behind him. This happens every time the camera zooms in or out.
- During the ritual to trigger the Avatar State, the oracle threw in one of the torches in the background into the bowl. After the scene returns to the oracle, the torch was back in place.
- When Katara is talking to Aang about what happened when they went to the Southern Air Temple and saw Monk Gyatso's skeleton, it cuts to a close-up of her face. During the close-up, the Water Tribe insignia on her necklace is missing.
- During Aang's last dream, while he is fighting on Zuko's ship, it is a new Fire Nation cruiser instead of the older variant.
- As the captain asks if they are ready to go, the red spike on the front of his helmet turns gray in a few frames.
- When the captain tries to plead with Azula, after revealing the set-up, his mouth is not moving.
- At the time Sokka tries to get on top of a ostrich horse, its saddle appears to be a simple seat on its back with the area under it exposed and showing its fur color. For a split-second, however, it turns green implying the saddle fits around its entire body. It soon changes back to the original brown.
- When Azula and Zuko are fighting, Azula hits Zuko on his head and three scratches appear on Zuko's right temple, but in the next scene, he no longer has these marks.
- When Azula grabs Zuko's hand during her and Zuko's fight, she has no Fire Nation hair clip. The clip reappears in the same scene.
- When Aang is in the Avatar State and crashes to the ground to destroy everything around him, Katara does not get thrown out of the way like everything else.
- During the line-up of Avatars that appears during Roku's talk with Aang, the airbending Avatars' eyes are glowing, but not their tattoos.
- When Zuko cuts his top-knot, part of the red cloth still remains. In the next shot, it is gone.
- When Zuko's top-knot flows down the river the bottom of the ponytail holder flickers on and off.
- This is the first episode where Sokka's shirt is sleeveless.
- This is the first episode where Aang is seen earthbending, albeit in the Avatar State.
- In this episode, Aang performs a similar move with airbending that he used to raise himself with waterbending in "The Avatar Returns".
- This episode had four writers involved in the writing process, which is more than any other episode had until "The Tales of Ba Sing Se".
- This is the first episode where Katara is considered an official master of waterbending, following her training of the art at the North Pole.
- In the scene where Azula's ship captain accidentally reveals that Zuko and Iroh are prisoners, the creators originally planned on Azula vaporizing the man on the spot, but later decided that was "a little harsh".
- In the beginning of the episode, Pakku is wearing different clothing due to a warmer climate.
- The statues that Avatar Kyoshi earthbends are similar to the statues used by the Earth King's Royal Guards against Aang and his friends when they were trying to infiltrate the Earth Kingdom Royal Palace.
- This is the second of three episodes in the series to have a name that starts with "The Avatar"; "The Avatar Returns" and "The Avatar and the Fire Lord" are the other two.
- Zuko and Iroh cutting their hair parallels the story of Buddha, who, when starting his journey of self-discovery and enlightenment, cut off his hair beside a river.
- The writing on Zuko's knife reads " ", which means "Never give up without a fight."