Prue and Phoebe come home from a shopping spree just as Piper and Leo are heading upstairs. Piper freezes the room so they can talk in private. Phoebe notices that Piper is wearing a front-clasp bra (an indication that she and Leo are about to have sex). Piper looks at all the clothes Prue bought and wonders if she's simply drowning her sorrows over losing Andy, but Phoebe pulls out a naughty-looking piece of lingerie that suggests Prue's over that loss. Piper shoos them away; she never knows how long her freezes hold. Piper runs back to Leo just as he unfreezes, and they run upstairs.
As Prue is undressing in her room, a ghostly Rex Buckland appears behind her. He tells her to pull a tiara out of her briefcase, and that she believes it's her date book. Kit sees Rex and hisses at him, but Prue doesn't know why. Back at Buckland's, Rex tells Hannah that their plan to frame Prue is well underway, and that this is the second time he's used his new power of astral projection to help it along; he used it earlier to trick Prue into taking the tiara from the vault. Hannah still doesn't understand how it works, so Rex uses it to get her to take off her dress.
The next morning, Piper gets up late and is on her way to work when Prue and Phoebe make her spill the beans about the night with Leo. Piper says it's been a while since she had sex, so she ended up freezing Leo several times, much to Prue and Phoebe's amusement.
Andy questions Prue about the theft of the tiara. She remembers nothing of stealing a tiara. Darryl is suspicious, in no small part because the security tape from the vault is missing.
Andy and Darryl appear at the manor with a search warrant. They search a bedroom and Piper spots the tiara as Andy opens a drawer. She freezes the room and moves the tiara to under a pillow. Rex projects in and tells Andy to look under the pillow. Darryl looks under the pillow and Piper freezes the room again. Piper moves the tiara into a dresser, but Rex suggests to Andy that he check there. Piper freezes the room again and Phoebe moves the tiara to the attic, without saying where she took it. Rex is thwarted at last and the two cops finally give up and leave. Rex returns to his body, and tells Hannah they'll have to up the ante.
The sisters can't figure out how the tiara got in the manor, though Phoebe suspects a warlock. Leo arrives, ostensibly to fix the bathroom sink. Instead, he heads to the attic and uses telekinesis; this is the first hint that he is not just a handyman. Piper walks in and Leo tells her that he might have to leave.
Phoebe goes to Rex's apartment and his astral form insists that she will see it as "spectacular".
He offers her wine and tells her that "Zeitgeist Magazine" wants to interview her. He offers her sushi and walks out. He projects, and gives her a premonition of Prue at Buckland's, being pursued by a warlock. She walks out in a panic. Rex calls 911. Manipulating his voice to sound like Jaime's, he claims he is at Buckland's and someone is trying to kill him.
Prue is working late at Buckland's. She sneaks into Hannah's office and uses her computer; she looks for Hannah's name on the database, and there's no record of it. She looks for Rex's name as well; there's no record of it either. Rex projects and tells her that a warlock is after her. He projects again and tells her that an innocent is in danger, and that she is to grab an artifact. Hannah cracks Jaime over the head with the artifact, killing him, and leaves the missing security tape on his body. Andy and Darryl find Prue over the dead security guard, with the murder weapon in her hand. The security tape shows Prue taking the tiara. The police arrest Prue for murder.Piper and Phoebe go to Rex's apartment to seek his help, but find it empty except for Phoebe's lipstick. They realize that Rex is a warlock. Back at the manor, they try to figure out how to free Prue. They conclude that if Rex is a warlock, Hannah almost certainly is one as well.
Phoebe hides the tiara in an armoire, not knowing that Rex is projecting into the room. They go to the jail and Piper freezes the guards. Piper unlocks Prue's cell; the two flee, and join Phoebe outside. Rex, however, is waiting outside with a Polaroid camera and takes a picture. He says he has known all along they were witches, but saw he wasn't powerful enough to attack them directly so he opted for blackmail; he demands their powers in return for the picture, and also promises to clear Prue of the tiara theft as well. He hands them a lantern that will catch their powers when they cast the relevant spell.
The sisters discuss Rex's demand, not knowing that Rex and Leo overhear them, and decide to give up their powers in hopes that they can somehow reverse it. The sisters cast the Relinquishment Spell, each one in turn, and their powers go into the lantern. The Book of Shadows is now entirely blank. Andy doesn't want to believe Prue is guilty of murder; the evidence tying her to the guard's death is piling up too neatly.
Rex comes to and tells Hannah that the sisters are on their way. Hannah shapeshifts into a panther.
Andy searches for the names Rex Buckland and Hannah Webster, and discovers that the real ones were murdered on the same day. The real Hannah was African American; the woman using her name is white. The real Rex was balding, short and stocky, unlike the follically-enhanced, strapping man using his name. He tells Darryl that he thinks the faux Rex and Hannah are framing Prue.
The sisters go back to Buckland's. They hand over the lantern to Rex. Hannah, in her panther form, rushes out from the office. Unknown to the sisters, Leo walks into the attic and finds the Book of Shadows blank. He raises his hands over it and restores the spells to its pages, and with it the sisters' powers. As Hannah leaps, Piper throws out her hands in fright. Suddenly, both Hannah and Rex freeze. The sisters realize that their powers are restored and Prue moves Rex to where the sisters were. Hannah knocks Rex to the ground, mauls him and returns to human form. The two go up in flames. Hannah protests that Rex had failed, not her as they disappear into the fire, leaving only ash behind.
The sisters return Prue to jail, where Andy and Darryl set her free. They tell her that they found the tiara in Rex' office, and also have evidence Rex and Hannah were skimming off auction proceeds. The sisters find the Book of Shadows restored. Leo comes in for his toolbox and says goodbye, saying he's fixed everything he was supposed to fix. The sisters tear out the relinquishment spell and burn the page. Leo walks out the front door, and is seen orbing as he leaves.