When the pups and Cap'n Turbot camp out under the very rare Magical Mer-Moon, magical things begin to happen. Lured by the mystical mer-pup song and then transformed into mer-pups themselves, Skye and Zuma and even water resistant Rocky perform an underwater rescue in a sunken old ship. Cap'n Turbot and Ryder help out by diving deep to bottom of the bay in their Diving Bell to help a mer-mom and her baby.
The episode opens with Ryder, the pups and Cap'n Turbot sitting around a campfire on the beach. Ryder distributes liver sausages around to all the pups, one of which Cap'n Turbot also takes and eats. Zuma warns Cap'n Turbot that he might turn into a pup, to which Cap'n Turbot agrees; being under the "magical mer-moon" that night. Zuma then brings up the legend of the mer-pup, and he and Skye explain that on the night of a full mer-moon, the touch of a mer-pup can turn regular pups into one; just until the sun rises at the end of the night.
Chase expresses his skepticism of the legend, but Cap'n Turbot assures everyone that on a night long ago, he encountered a mer-pup. In a flashback, a young Cap'n Turbot was sailing and the mer-pup briefly showed itself, then dove underwater. While still hearing its sweet song, Cap'n Turbot tried to take pictures of it but fumbled with the camera; the best one he took had his thumb blocking all but the mer-pup's tail. The picture is shown to everyone, but Chase is not convinced. Skye, Rocky and Zuma mention how cool it would be to see or to be mer-pups, but when Rubble dozes off voicing his opinion, Ryder decides that they should all go to bed.
Too excited to sleep, Skye and Zuma decide to go search for the mer-pup at the shore. Just as they are falling asleep, Zuma hears the mer-pup and awakens Skye. The mer-pup is heard again and is seen jumping out of the water. The pups notice that the song sounds sad – not sweet as the Cap'n described it – and rush back to Ryder thinking it needs help. Everyone rushes to the shore, but a dolphin (as smelled by Chase), is seen jumping out of the water. Ryder claims it was a false alarm and suggests everyone go back to bed. While everyone else goes back to camp, Rocky decides to stay behind with Skye and Zuma to search for the mer-pup. Rocky quickly falls asleep, and convinced that they saw the mer-pup, Skye and Zuma go searching for it on Zuma's paddleboard.
In open water, the Mama mer-pup sings and reveals itself, and then brings the pups even farther from shore. The mer-pup knocks Zuma and Skye off of the paddleboard, then touches noses with each of them; magically turning them into mer-pups. After rejoicing in their new, albeit temporary, fish tails, Skye and Zuma conclude that the mer-pup needs help underwater. Zuma calls Ryder and the pups and shows him his and Skye's fish tails to prove that mer-pups exist. The mer-pup is heard in the background, and Cap'n Turbot wakes up and says that it was a song of distress. Zuma informs Ryder that he and Skye are going to dive and check out the problem. Ryder turns on Zuma's and Skye's homing devices (in their pup-tags), and summons the rest of the pups to the beach.
After Cap'n Turbot joins the line-up, Ryder explains the ordeal with the mer-pup, Zuma and Skye. Chase, however, is still not convinced the mer-pups are real. Ryder orders Cap'n Turbot to go underwater with the diving bell, taking Marshall and Chase along with him. Rubble is told to ride along with Ryder in Zuma's submarine. Rocky is given the pup-pad and is tasked with watching Zuma's and Skye's progress from a lifeboat; updating everyone if their path changes.
The mer-pup leads Skye and Zuma to a sunken ship on the edge of an underwater cliff. The mer-pup points out her child is trapped behind a closed door, in the ship's cabin, which is blocked by a fallen wooden beam. Skye, Zuma and the mer-pup attempt to lift the beam out of the way, but it is too heavy. Zuma assures the mer-pup that help is on the way, and Skye leaves to search for Ryder and the rest.
Ryder is soon found and pointed in the direction of the ship. In the diving bell, Chase continues expressing his skepticism of the legend while behind him Skye makes faces and mocks him. Chase turns around after Marshall debunked his skepticism, and is astounded and faints when seeing Skye. Skye gets Cap'n Turbot to follow her to the rescue site.
Zuma shows everyone the problem, and Ryder uses the submarine's arm to remove the wooden beam. When placing the beam down away from the ship, part of the rock underneath the ship breaks and starts to crumble from the heavy impact. The door still does not budge when Zuma and Skye push on it. More rocks break, the ship tilts more over the edge of the cliff and the little mer-pup avoids wreckage falling from inside of the damaged ship. Cap'n Turbot uses the diving bell as a battering ram to smash open the door, and Skye and Zuma enter the room to bring out the little mer-pup. After being found hiding in a corner, frightened, the little mer-pup comes out when hearing its mother's song. The ship continues tilting, but Skye emerges from the room carrying the little mer-pup and passes it to the mother. Still inside the ship, Zuma's tail gets trapped by a falling wooden board.
Above water, Rocky informs everyone that many big things are approaching the ship. Whales pass by, and as one waves to Cap'n Turbot, it knocks over the ship's mast. The impact breaks more of the rock supporting the ship, and the ship falls over the edge of the cliff, landing upside down on the seabed below. With Zuma being unable to exit the ship due to his tail being pinned by the debris, Cap'n Turbot is worried that he will turn back into his regular pup form before he can escape, and without his pup-pack and the oxygen tank it carries, Zuma could drown. In order to break apart the hull, Rocky is needed.
Again above water, Skye gets Rocky's attention before his lifeboat is flipped by the mer-pups. The little mer-pup then transforms Rocky into a mer-pup by touching noses with him. While Rocky is led down to the ship by Skye and the mer-pups, he enjoys swimming around underwater. He is then told to use his screwdriver to loosen the boards of the ship's hull. Rocky does so, with the boards being removed using the submarine's arm. As Zuma emerges from the opening in the hull, he startles and thanks Rocky and gave him a high five, before everyone works their way back to the water's surface.
Before the mer-pups leave, Cap'n Turbot tries to take photos, but again fumbles the camera and has his finger block most of the picture. Marshall asks Chase about his current thoughts on mer-pups and to everyone's amusement, Chase states that everyone knows they exist, showing he's still skeptical, but at least admits he was wrong previously. Before they transform back, Skye, Zuma and Rocky decide to swim with the mer-pups one more time. As they swim, they sing "The Mer-Pup Song". Floating on the water's surface following their swim, Skye, Zuma and Rocky shout goodbyes to the mer-pups and express the fun they had. They change back to their regular pup forms once the mer-moon is below the horizon, and Rocky quickly swims to Cap'n Turbot's ship now that he was no longer a mer-pup and was in water, triggering his aquaphobia again.
Back on the beach, everyone is tired and goes to bed except for Cap'n Turbot, who chooses to stay just in case the mer-pups come back (despite the mer-moon no longer being up). Immediately after Cap'n Turbot falls asleep, the episode concludes with the mer-pups showing themselves above the water.