Gunn is still trapped in the suburban hell dimension, with no memory of his normal life, and doomed to suffer eternal torment at the hands of a torture demon. Marcus Hamilton, the new liaison to the Senior Partners, shows up and offers to remove Gunn from Hell in exchange for his soul. Gunn refuses to even listen to Hamilton's offer, and resumes his own torture at the hands of the demon.
The main storyline concerns Connor, who is now happily living the life of a normal teenager. Connor's adoptive parents, the Reillys, bring him in to Wolfram & Hart after a van hits him and he emerges unscathed; they are concerned for his welfare, and had heard of the law firm's reputation for solving odd cases. Angel, however, is furious at the idea that Connor might again be exposed to the supernatural, and initially refuses to help. However, when Connor and his parents are attacked by a trio of demons, Angel accepts the case.
Despite Connor's oblivion to their connection, Angel enjoys seeing his son as a happy, prosperous kid, but the investigation into the demon attack leads Angel to an elderly and powerful demon sorcerer named Cyvus Vail -- the man responsible for creating the new reality in which Connor leads the life of a normal teenager. Vail explains that the demon attack was supposed to fail, and its purpose was merely to attract Connor's attention. Vail reveals that his real motivation is an ancient prophecy that identifies Connor as the only person able to kill Vail's old enemy, the demon warrior Sahjhan (imprisoned in his urn since episode "Forgiving" in Season 3). Vail demands that Connor kill Sahjhan, and in return, he will allow him to resume his normal life.
Meanwhile, Wesley continues to study Illyria and her super abilities with Spike, who serves as Illyria's "punching bag" in an attempt to determine her weaknesses. Wesley explains to Illyria that Angel has earned their loyalty, but Wes begins to change his mind when he grows suspicious of Angel's seemingly odd behavior concerning the Connor Reilly case.
Wesley's investigation leads to Vail, and records indicating that he had been hired by Wolfram & Hart to cast a massive, reality-changing spell on the day that the law firm was taken over by Angel Investigations. Angel aggravates these suspicions by refusing to offer an explanation, and Wesley begins to theorize that Angel's behavior may be a result of guilt, specifically that Angel had sacrificed Fred in exchange for control of Wolfram & Hart, and then paid Vail to erase everyone's memories of the deal.
At Vail's house, Connor and Sahjhan engage in a fight to the death, as a helpless Angel is mystically prevented from aiding his son in the battle. Accompanied by Illyria, Wesley confronts Angel with his theory that Vail's spell is responsible for Fred's death, and destroys the magical box that contains the spell. As a result, Connor, Wesley, and Illyria all regain their lost memories of the previous reality. Connor, who had been losing his fight with Sahjhan, regains his fighting skills and manages to kill Sahjhan. However, despite a brief return to his old, defiant personality during the battle, Connor manages to retain the emotional stability created by Vail's spell.