The Solarion Four settlement is destroyed, and the Bajorans claim responsibility. The world of Bajor was annexed by the Cardassians generations ago, and the Bajorans have been refugees ever since, and apparently some of them are using terrorism to draw attention from the United Federation of Planets.
Picard meets with Admiral Kennelly, who tells him that the Bajoran responsible is a terrorist named Orta. Picard's mission is to find Orta, and to send him back to the Bajoran settlement camps where he can do less damage.
Kennelly assigns a controversial person to assist Picard: Starfleet Ensign Ro Laren, a Bajoran whose reputation is very poor. Kennelly insists she can help, and she comes aboard the Enterprise.
Despite a difficult attitude, and a previously unknown Bajoran custom of having their surname first, Ro works with the crew to locate Orta. Ultimately, they head to the third moon of Vallor One where they believe he is based.
Meanwhile, Ro receives a secret communication from Admiral Kennelly and tells him all is going according to plan.
The next day, the Away Team prepares to beam down, but discover Ensign Ro had preempted them by beaming down six hours ago. They follow her, and are promptly captured by Orta and his people. Orta, who was disfigured by Cardassian torture, tells them that he felt abducting them was necessary, and says that the Bajorans were not responsible for the attack.
Picard finds himself inclined to believe Orta, but confines Ro to quarters for her unauthorized beam down. Guinan, who has befriended Ro, goes to see Ro, and after learning there is more to what is going on that meets the eye, convinces Ro to talk to Picard.
Ro reveals that she is on a secret mission by Kennelly to offer Orta Federation weapons in exchange for returning to the camps. Given her experiences, she no longer knows what to do or who to trust. Picard decides that the best course might be to actually take Orta back to the camps, and see what occurs.
As the Enterprise escorts a Bajoran cruiser to the camp, however, two Cardassian ships cross the border and demand the Enterprise leave the ship to them. Picard initially refuses, and the Cardassians give him an hour to reconsider. Kennelly, far from helping, insists that the Cardassian treaty is the more important issue and orders Picard to withdraw.
Picard withdraws, and the Bajoran cruiser is destroyed. However, suspecting a chain of events like this might occur, Picard had ensured no one was aboard, and had the ship operated remotely. Picard informs Kennelly that the Bajoran ships are so old and obsolete that they were incapable of attacking the Solarion Four settlement, and suggests that the Cardassians staged everything, hoping to find someone like Kennelly, naive enough to help them solve their problems.
With the mystery solved and the mission accomplished, Ro accepts Picard's offer to remain in Starfleet and join the Enterprise crew.