Dax and Odo detect an unusual particle field emanating from a planet in the Gamma Quadrant, so they beam down to investigate. They discover the field is coming from a small village's power generator, but when a villager named Colyus discovers them, he is suspicious of them. Once Odo convinces Colyus of their intentions, Colyus explains that the village is a Yaderan colony and 22 people have disappeared in the past few days without a trace. Odo and Dax offer to help investigate the disappearances, but the village leader, Rurigan, seems unconvinced that the villagers will ever be found.
The next day, Odo talks with a shy child named Taya whose mother disappeared recently. The two find a common ground in that they are both orphans now - Taya has lost both her parents, while Odo never knew his - and during the course of their conversation, Taya reveals that the Yaderans never leave their valley. Rurigan, who was one of the village's founders and is the oldest living member, assures Odo that searching beyond the valley would be pointless. Apparently no one, including Rurigan and Colyus, has thought about searching beyond the valley or ever considered leaving it. In addition to this curious behavior, Rurigan does not seem intent on finding the villagers despite the fact that his own daughter is among the missing.
Odo and Dax take Taya to the edge of the valley, where Taya points out a tree and tells them she has never been beyond that point. When Dax passes that point, a Yaderan device vanishes from her hand. Taya reaches past the tree and her arm begins to disappear until she brings it closer to her. The three return to the village to share their findings with Colyus. Dax uses the reactor to make Colyus' cloak disappear and rematerialize, demonstrating that the entire village, including its citizens, is a holographic projection created by the reactor's particle field.
The reactor has fallen into disrepair and is breaking down, causing the villagers to disappear one by one. Colyus is skeptical and refuses to believe Dax and Odo at first, but they bring the villagers to the area by the tree and reenact what happened to Taya. The villagers begin to panic, thinking this is some sort of trick, but Colyus convinces them to believe Dax and Odo's story. The villagers were programmed not to think about leaving the valley, which is why such a thing has never occurred before. With Colyus' help, they convince the villagers to let Dax shut down the reactor and repair it before it stops functioning completely. However, when she does so, the village and all the villagers vanish - except Rurigan.
When the Dominion arrived on Yadera Prime, Rurigan explains, it destroyed life as he knew it, so he escaped to an abandoned planet and recreated the world he had lost. He has been living in this illusion for over 30 years, and now he admits that none of it was real. However, Odo points out that were it not real Rurigan would not have been able to develop feelings for the villagers - after all, they are only holograms. He argues that Taya and the others are real and deserve a real chance to live. Dax and Rurigan repair the reactor, restoring the village, including the missing people. Before he and Dax leave, Odo realizes how close he has grown to Taya and the two share a heartfelt goodbye. Taya thanks him for finding her mother and wishes him luck in finding his own parents. Before they leave, Odo demonstrates his abilities by morphing into a toy Taya played with earlier.