Kou, his friend Chuck Keith, and veterans South Burning and Dick Allen follow Gato through the outback in an attempt to recapture the Physalis. Zeon forces ambush them and kill Allen as Gato awaits a Komusai shuttle for extraction. Kou destroys the shuttle but it is actually a diversion - Gato escapes on a submarine that provided covering fire during the Torrington base attack.

Somewhere in East Africa, the Albion goes on patrol, while Monsha faces Albion chief engineer Mora Bascht's wrath for hitting on the ship's female crew and trying to sabotage Kou's landing after his search patrol. Gato arrives at Kinbareid and boosts the morale of the soldiers. Meanwhile, Orville - the Zeon mole who helped Gato's infiltration in the first episode - has been unmasked and flies out in a Core Fighter II to warn Kinbareid of the Albion's patrols but could not find the base complex and is shot down by a Zaku patrol. The Zeon forces mobilize and attack the Albion to buy time for Gato and the GP02 to fly into orbit using one Heavy Launch Vehicle still in the base. The base holdouts surrender as soon as Gato flies away.

The Albion arrives at Von Braun City on the Moon to have the GP01 upgraded to Full Vernian (Full Burnern) while the crew goes on shore leave. A snide comment from Monsha at a bar prompts Kou to wander around the city where he is beaten up by some thugs. A one-armed man named Kelley Layzner rescues him and brings him to a junkyard where he lives with his lover. Kou learns of Kelley's origins as a Zeon pilot and helps him fix a Val Walo mobile armor that has been hidden for years. He returns to the Albion and begins testing the Full Vernian-equipped GP01. Elsewhere in the city, Cima blackmails Anaheim boss Gilbert O'Sullivan with a colony drop if he talks to the Federation about her. She also tells Kelley to get the Val Walo ready for action.

A few days out of Von Braun, Burning continues to train Kou and Keith, who later eggs him to try giving Nina a chance. Keith also earns Mora's ire for showing him Monsha's private collection of Nina pictures. A resupply rendezvous by a Federation ship is cut short as the Albion detects the Federation flagship Birmingham, with General Green Wyatt aboard - meeting with Cima. In the midst of the ensuing battle, Burning retrieves a briefcase that contains files for something called "Operation Stardust" and talks with Kou about them. However, a minor hit on Burning's GM Custom during the battle turns fatal, as the mobile suit careens out of control and explodes. Uraki is promoted to junior lieutenant as the crew mourns Burning's death.

Gato retreats after the nuclear strike destroys two-thirds of the Federation's fleet, but runs into Kou. As Nina breaks down watching them fight, both of their mobile suits take heavy damage and the pilots flee before they explode. Meanwhile, Cima's fleet hijacks two colonies in transport and later blow off one mirror each from them. When the Albion crew is informed of the colonyjack, Nina correctly theorizes that the colonies will crash into each other, with one in direct course for the Moon. She also reveals the existence of a third Gundam built under the GDP.

Kou and Gato, now in their mobile armors, finally take each other on as the Albion crew tries to stop the colony before it passes the minimum limit for terminal entry. Cima's crew takes Delaz hostage aboard his flagship, the Gwaden. At Jaburo, General Kowen desperately tries to convince EFSF supreme commander Gen Gene Collini of mobilizing the military's full might to stop the colony, but Jamitov Hymen has Kowen taken away. Delaz discovers that the Federation has deployed the Solar System II mirror array past the terminal entry point and encourages Gato to see the operation through - before Cima kills him. Out of rage, Gato drives one of the Neue Ziel's claws at the Gwaden bridge.