In Phoenix, AZ, an employee of Roush Technologies, Sandy, is sick when a corporate carpool van leaves him off at home. In the morning, he doesn't come out to the van so another Roush employee enters the house looking for him. Sandy is on a sofa with his chest exploded outward. The other man is attacked and killed by an alien before he can leave the building.
In Washington, Mulder is using high tech equipment to salvage information from the burned X-Files. The investigating committee has trouble believing the story of the alien ship in the antartic. After the meeting, Scully tells Mulder that she still must rely on science. Skinner tells Mulder that his reassignment to the X-Files has been denied, but Skinner directs Mulder to a file folder in the X-Files office. In the folder, Mulder finds information on Sandy's death. Agent Spender walks in and we learn that Spender and agent Diana Foley have been assigned to the X-Files. Meanwhile the Cigarette Smoking Man informs the Consortium that the alien is alive and is being sought. He enters a surgery facility and tells the doctors that Gibson Praise must be prepared to travel. Gibson's ability to read minds may help locate the alien. Mulder and Scully visit Sandy's house, violating FBI rules, and find a piece of claw left in a gouged wall.
At the Rolling Hills Nuclear plant, 60 miles from Phoenix, a nuclear engineer named Homer investigates an unusual gague reading and is killed by the alien, which is hiding in the hot chambers near the reactor. By the time Mulder and Scully learn of the incident and arrive there are dozens of FBI and emergency response people at the plant. Spender and Foley deny Mulder and Scully access to the scene and as Mulder and Scully leave, they find Gibson hiding in their car. They take him to the Camelback View Motel. Gibson's skull has been cut open and stitched back shut. He has a fever and is not well. Scully argues that Gibson could be their last best chance to prove Mulder's beiefs. As they leave to take Gibson to a hospital, Foley arrives and tells Mulder that she accepted the X-Files assignment to protect Mulder's interests. The creature is in the reactor #4 building. Mulder goes with her to find it while Scully takes Gibson to the hospital. Gibson is soon kidnapped by an operative of the Cigarette Smoking Man and also taken to the nuclear plant.
Mulder and Foley find what appears to be a shed skin of the alien. They see the operative and Gibson, and follow to the reactor chamber, which has control rods extending down into a pool of water. The FBI agents are locked out of the room but watch the alien kill the operative. Gibson, apparently communicates with the alien, and both disappear to somewhere Mulder cannot see them.
The investigating committee reprimands Mulder and Scully and orders no involvment with the X-Files. Scully tells Mulder that the claw found in Sandy's house contains a DNA match with the virus, which also matches DNA in Gibson. In fact, the DNA matches inactive DNA in all humans, but it is active in Gibson. The Cigarette Smoking Man visits agent Spender to congratulate him on how the affair was handled. At the nuclear plant, we see Gibson hiding as under water in the reactor vessel, we see the alien again shed its skin. Rather than the reptilian creature we saw in the X-Files Movie, it now looks like a "regular" grey alien.