In flashback, twenty-four hours before Agent Scully told an FBI assembly that her partner was dead (see previous season's cliffhanger)... Mulder receives a tip from Kritschgau that their conversations have been monitored. Mulder looks upward--and notices a small pinhole in the ceiling of his apartment. He races upstairs, where he encounters Scott Ostelhoff, in the apartment directly above his own, igniting flash paper. A struggle ensues, during which a shot rings out.

    Mulder tells Scully he killed Ostelhoff. He also informs her that the flash paper Ostelhoff attempted to destroy contained a record of seventeen phone calls placed to the PBX operator at the Bureau. The agents conclude their own agency is behind the cover-up... and that they have been pawns in a conspiratorial game since the very beginning. Mulder suggests they create their own lie in hopes of uncovering the truth.

    Shortly thereafter, Scully travels to Mulder's apartment and identifies Ostelhoff's faceless body (the result of the shotgun blast) as that of her partner. Later, during a meeting with Blevins and Skinner, she is instructed to appear before a joint FBI panel. Afterward, Scully traces the phone number listed on Ostelhoff's flash paper to an FBI branch extension that includes Skinner. This leads Scully to conclude that Skinner may be a mole. Meanwhile, the Cigarette-Smoking Man tells the Syndicate he questions reports of Mulder's demise.

     Mulder uses Ostelhoff's identification card to infiltrate DARPA, a secret research facility. There he encounters Kritschgau, who explains that the card will give him access to the entire building. Kritschgau then claims the hoax Mulder has been drawn into dates back to the days just after World War II, a time when generals were desperate to continue fueling the nation's economy via a military build-up. In 1947, Kritschgau states, the government began using the Roswell incident as a cover story to distract the American public from the truth-and a top secret program involving DNA. He laments he went along with the lie... until his own son was exposed to bioweapons during the Gulf War. Shortly thereafter, Kritschgau is led away by sentries. Mulder manages to escape detection and make his way deeper into the research complex. He discovers a room containing dozens of alien bodies, identical to the one he discovered at the ice cave-giving credence to Kritschgau's story.

     Dr. Vitagliano finishes his examination of the ice core samples given to him by Scully. The cells contained within, he concludes, are the beginnings of a new life form. Scully decides to perform a test that will compare the strange organism to her own DNA. Before she does so, she encounters Skinner, who reveals how a pathology report concluded the body found in Mulder's apartment is not her partner. Later, the DNA test between the samples proves a match. Scully concludes her cancer resulted from being deliberately exposed to the organism.

     As Mulder continues his journey through the facility, he discovers a warehouse--a "repository for all the alien-related odds and ends that the Cigarette-Smoking Man has taken from Mulder over the years." There he discovers a gigantic index system, which contains cards for Scully, Kritschgau, and a blank card for Kritschgau, Jr. He also discovers a metallic vial--which could contain a cure for Scully's illness.

     Scully appears before the FBI panel and announces she will expose the "mechanism of deception" that drew her partner, and herself, into the government's lies. She then informs the panel that her partner died the previous night of a self-inflicted gunshot wound to the head. As she begins to present scientific evidence that will support her claim, she is suddenly taken ill. Meanwhile, the Cigarette-Smoking Man, working in the shadows, arranges Mulder's escape from the research complex. The Lone Gunmen analyze the contents of the vial... and conclude it contains only deionized water.