"As the solstice approaches, the natural world and the Spirit World grow closer and closer until the line between them is blurred completely."
— The old wanderer explaining Senlin Village's situation to Katara.
Team Avatar reaches an Earth Kingdom village which is being attacked on a nightly basis by a monstrous spirit called Hei Bai. When Aang attempts to reason with the spirit, it kidnaps Sokka, prompting Aang to go after him. Aang accidentally ends up in the Spirit World, where he is told that his previous incarnation, Avatar Roku, has a message for him. Returning, Aang proceeds to calm the attacking beast, restoring peace to the village. Meanwhile, Iroh is captured by the Earth Kingdom, which seeks to have him prosecuted for past war crimes; this causes Zuko to briefly cease his pursuit of the Avatar and free his uncle from his captors.
The group arrives at an Earth Kingdomforest, seeing what looks like a huge black scar in the middle of the woods. They land, only to find out that it was burned down by Fire Nationsoldiers. Aang feels guilty and blames himself for the incident, stating that it is the Avatar's duty to protect nature. However, Katara assures him that the forest will grow back and shows him the abundance of acorns scattered on the ground. The party is startled when an old man comes asking the Avatar for his help. He leads them to Senlin Village, where many of the buildings are in ruins, and Aang learns that it is being terrorized by a spirit known as Hei Bai. The villagers ask Aang for his help and he agrees to help, although he is very much skeptical of what he can actually do to save the village.
Meanwhile, Iroh is relaxing in a self-heated pool of water that he has turned into his own personal jacuzzi. Zuko becomes very impatient, demanding that his uncle get ready to leave right away so they can continue their search for the Avatar. Iroh agrees, but when he stands up, he reveals his naked body. Zuko, disgusted, shields his eyes and tells his uncle he can take a few more minutes, though warns him that if he is not ready within a half hour, he will be left behind. Iroh slumps back into the pool and quickly falls asleep.
He is awoken some time later by the sound of a meadow vole, initially thinking it to be an ambush. After he overcomes his disorientation, he notices the sound came from the meadow vole and relaxes again. He gently takes the creature into his hands and begins talking to it. Iroh realizes he has missed Zuko's time limit, but does not seem to care, saying that he had "a very sweet nap". However, Earth Kingdom soldiers suddenly ambush him, recognizing his position as a former Fire Nation general.
At sunset, Aang goes out to confront the spirit; he waits for its appearance, but begins to walk away when it fails to appear. As he has his back to the forest, the massive form of the spirit appears behind him. Aang tries to talk to the spirit, but it ignores him and goes about destroying houses with huge energy blasts emitted from its mouth. Sokka runs out to help Aang, but is captured and taken away by the spirit. Aang, while chasing after Sokka and the spirit, finds himself unexpectedly in the Spirit World.
Zuko comes later with two soldiers and, upon finding out that the pool of water in which Iroh rested earlier has a landslide-like formation, deduces that Iroh had been captured by earthbenders. Determined to find his uncle's attackers, Zuko sets out to find his uncle. Meanwhile, the Earth Kingdom soldiers, traveling with Iroh chained up on ostrich horses, want to bring him back to Ba Sing Se, the place to which he laid siege for six hundred days before his departure. Iroh subsequently feigns falling asleep, secretly leaving his stinky sandal for Zuko to find.
Aang's journey with Fang is spotted by Iroh, who uses this chance to trick his captors by asking them to tighten his chains. The captain has one of the soldiers tighten the chains, while Iroh stealthily snorts onto the cuffs, heating them up. When the soldier touches the cuffs, he burns his hand and screams in agony. Iroh quickly makes a bold but ultimately failed attempt for freedom. After he is caught, the soldiers debate among themselves about what they should do.
The dragon takes Aang back to his body and there Aang learns why the spirit is terrorizing the village; the spirit was distraught over the destruction of its home, the forest. Aang returns to the village, much to the relief of Katara. He reports that, while he has not found Sokka, he is now ready to face the spirit.
The earthbenders quickly decide to crush Iroh's hands by dropping a large rock on them. Just before the punishment is to be inflicted, Zuko appears and kicks the rock aside. He subsequently lifts his leg and breaks the chains that are binding Iroh in half with one swift movement, to which Iroh praises, "Excellent form, Prince Zuko." Zuko smiles and replies, "You taught me well." Iroh and Zuko defeat the soldiers without much difficulty. After the fight, Zuko exclaims, "Now would you please put on some clothes?"
At sunset, Aang shows the spirit that the forest will grow back by giving him an acorn. Satisfied, the spirit, which turns into a panda bear, departs from the village, leaving in its trail a few bamboo stalks from which the captured villagers and Sokka emerge. Aang subsequently tells Katara and Sokka that he needs to go to the temple – which is located in the Fire Nation – to speak with Avatar Roku by sunset tomorrow, the day of the solstice.
Although Aang sees a statue of a giant bear in this episode and a Panda Bear spirit in the end, the party still expresses doubt that such an animal as a "bear" can exist in "City of Walls and Secrets".
This episode sees the first mention by name of Ba Sing Se, the walled city to which General Iroh laid siege for six hundred days and which would become important in Book Two. It was previously referred to as the "Earth Kingdom's capital city" in "The Southern Air Temple".
When Katara asks Sokka how he feels after his return from the Spirit World, he says he seriously needs to use the bathroom. In the episode "The Avatar and the Fire Lord", Katara asks if they have bathrooms in the Spirit World, to which Sokka replies that they do not.
Iroh is shown to have some connection with the Spirit World because he sees Roku's dragon while others do not. It is later revealed in "The Siege of the North, Part 2" that he may have traveled to the Spirit World in the past.
When the gang enters the village at sunset, Katara's dress is bright blue and Sokka's clothes are a dull blue. In the next shot, Katara and Sokka are seen from the front, but now their clothing is roughly the same color.
When the old wanderer places a coat over Katara and says, "You should get some rest", his mouth does not move.
When Aang returns to the village while in the Spirit World, he does not have his staff with him. However, after the scene where Zuko finds the sandal, Aang is sitting cross-legged holding his staff, which is also blue. When he leaves with the dragon, it disappears again.
When Aang is about to crash into his real body, his cheeks blush and are temporarily red, but while in the Spirit World, he is always blue.
When Katara turns to see Aang return to the village at sunset, her hair loopy becomes detached from her braid.
This episode ends with a shot of a crescent moon. The next episode, "Winter Solstice, Part 2: Avatar Roku", starts with a shot of a full moon despite the fact it is the same night.
The official Finnish name of this episode is Päivänseisaus (Solstice), but in the DVD release it is mistakenly named Päiväntasaus (Equinox).
The episode shares many similarities to Hayao Miyazaki's movie, Princess Mononoke, most notably in the presence of the spirit Hei Bai and in the planting of acorns at the end of the episode.
When chasing Hei Bai through the forest, Aang is reanimated in CGI.
This one of the few episodes where graphic censoring is done – when Iroh stands up in the hot spring naked, the animators use Zuko's hand as a censor. The second episode to use censoring is "The Waterbending Scroll", when a pirate moons Zuko.