Dr. Bashir, scheduled to leave for a conference the next day, tends to Chief O'Brien, who has dislocated his shoulder while kayaking in a holosuite. Bashir wakes up the next morning feeling tired, and is summoned to a meeting of the senior staff. Sisko introduces Sloan, the deputy director of Starfleet Internal Affairs. Sloan suspects one of them of being a Dominion spy, and they are confined to quarters.
Bashir finds his replicator out of order. He is escorted by a security detail to the ward room. Sloan treats him cordially while asking a few light questions and seems satisfied. He explains that the replicators have been disabled as a security measure, and takes Bashir's breakfast order for scones, so it can be brought to him (Sloan's man delivers him Worf's breakfast of Gagh instead of Bashir's scones). Upon returning to his quarters, Bashir suspects they have been searched. O'Brien secretly contacts him on a monitor, warning him that he was interrogated for hours, with every question about Bashir.
Bashir is then brought back to Sloan, who has changed his tone. He accuses Bashir of being a traitor, pointing out his subversive attitude, including his sympathy for renegade Jem'Hadar trying to cure their Ketracel White addiction ("Hippocratic Oath"), lifelong dishonesty about his genetic enhancements ("Doctor Bashir, I Presume?"), and agreement with a group of savants who suggested the Federation's best course of action was surrender ("Statistical Probabilities").
Bashir points out the lack of evidence supporting the accusation. Sloan stuns him with a theory that, during the time Bashir was in a Dominion prison ("By Inferno's Light"), he was persuaded to become a Dominion spy, but with a technique that would allow him to repress this information and believe he was a loyal Starfleet officer, then retrieve the intelligence from his brain later. Bashir understands Sloan's attitude but refuses to accept the idea. Sloan condemns him for contributing to Starfleet casualties, and has him march through the Promenade in handcuffs, to a holding cell. Sloan's staff, who have taken over for Odo, are disgusted with Bashir.
Sisko informs Bashir that Sloan had a son who was killed in the war, which could explain his viciousness. Sisko defends Bashir during another interrogation, but in private implies to Bashir that he thinks Sloan may be right. Back at the holding cell, Sloan informs Bashir he is being moved to another starbase without Sisko's knowledge. Suddenly, Bashir is beamed aboard a Dominion ship, and greeted warmly by Weyoun.
Weyoun confirms that Bashir is a Dominion spy without realizing it, but is dismayed that they must now go through the difficult process of convincing Bashir of this, something they have done many times before. Weyoun offers him scones to remind him of the time in the prison camp when he was offered scones after being kept hungry in solitary confinement, and began to be persuaded to join the Dominion. He was not tortured, but made a moral choice to help the Dominion end the war quickly and save lives. Bashir wavers, then wonders why Weyoun and Sloan are trying to convince him of the same thing, and concludes that Sloan himself is the traitor. At that moment, the ship is attacked, and Worf and Kira rescue Bashir.
On the Defiant, Sisko demands an explanation for why Bashir was beamed away by a Dominion ship. Bashir explains his theory that Sloan is a spy, possibly a Founder in disguise. However, Sisko, Worf, and Jadzia think Bashir is guilty. Desperate, Bashir grabs O'Brien, who pulls his arm away. Bashir asks him why his shoulder doesn't hurt, because he dislocated it playing springball. O'Brien claims it has healed, but Bashir knows that he hurt it kayaking. He realizes that everyone is behaving unrealistically. The Defiant bridge dissolves and Bashir finds himself in a holographic simulation room.
Sloan, now dressed in an all-black suit, informs Bashir that his loyalty was being tested, but Bashir's cleverness cut short the illusion. He confirms that Bashir was honest throughout the simulation by checking an implant near his ear. Sloan explains that he is a member of Section 31, an undisclosed Starfleet agency that operates without oversight. Bashir accuses them of violating Federation values, and Sloan responds by saying that they are a necessary group that must make ethical compromises to protect the Federation. He attempts to recruit Bashir, partly because of his fondness for holosuite spy fantasies ("Our Man Bashir"). Bashir refuses and threatens to expose Section 31, but Sloan seems unconcerned, and has him knocked out by hypospray.
Bashir relates the events to the DS9 crew. They see Section 31 as a formidable agency for their effectiveness and ability to remain secret. Sisko says that Starfleet command neither confirms nor denies their existence. He suggests that Sloan will try to recruit Bashir again, and orders him to accept such an attempt, so they can find out more. Odo is amused: Bashir's spy fantasies have become real.