A postcard arrives and the image on the front. Though Kowalski says they need the chimps to translate the words, Skipper believes it heralds "Farmmageddon". But when they go to the chimps ready for battle, they are told that it actually reads that Private's Uncle Nigel is coming for a visit, much to Private's (and Rico's) delight and Skipper's and Kowalski's disappointment.
Private's eccentric Uncle Nigel visits and doesn't make a good impression on the other penguins. Initially he seems to be as empty-headed and obsessed with doilies as Private himself, but when the other penguins create a reason to avoid him (by setting their Thermonuclear Fusion Reactor Core into overload, which would cause a meltdown if unattended), he reveals to Private that he is a top-secret penguin spy for the British agency, MI6 and is searching for the Red Squirrel, whom Private insists does not exist (given their lack of evidence of Red's existence).
Uncle Nigel interprets Private's sissy hobbies as his own spy cover and that maintaining his "cover" even in front of another spy is just dedication. He soon shows Private that the Red Squirrel does exist, and has a nefarious plan of causing acorn spores to grow so large that they would destroy all other plant life using a poison contained in a missile hidden in Cleopatra's Needle (the monolith in the park).
While Uncle Nigel battles the Red Squirrel, he tasks Private with disarming the missile, which Private manages to do through pure luck and clumsiness by accidentally falling directly into the missiles & tangling himself in wires right at the moment it was ready to launch, but the Red Squirrel escapes. Excited, Private returns to the base and tells the others that his uncle is a spy and the Red Squirrel does in fact exist. They however brush it off as imagination, and Uncle Nigel agrees with them, shooing Private away to make tea. But just as Private leaves, a grenade filled with knockout gas disguised as an acorn is dropped into the lair, and Uncle Nigel, Skipper, Kowalski and Rico are knocked out and wake up later in the lair of the Red Squirrel. Red Squirrel that he's finally captured the greatest penguin agent. Skipper assumes he referring to him before he is corrected that it's Nigel. At first, Nigel keeps up the act, but an unamused glare from the Red Squirrel forces him to drop it and confess that he's actually a super spy to the others. Skipper remarks that they owe Private an apology but he rather that it be money before he notices that Private hasn't been captured like them. Red dismisses Private from being a threat. Nigel assumes that he's fallen for Private's nancy-cat persona, as everyone else (who lived with Private) nervously chuckle.
Private then returns with tea only to find the grenade on the ground and everyone else missing, and instantly jumps to the right conclusion. At first, he hugs his Lunacorn plush, wondering what to do before going back to the park and trying to find the Red Squirrel's underground base, eventually managing to find the right tree. Upon stumbling inside, the Red Squirrel laugh at him for thinking he could fight with just a Lunacorn. Private teases that he's just jealous that he has a Lunacorn and he doesn't. Furious, the Red Squirrel grabs the plush and threatens to rip it apart before Private's eyes. But the young penguin turns the tables on him by turning on his toy's its glow-in-the-dark capabilities, because the Red Squirrel has developed a light sensitivity. But as Private frees the others, the Red Squirrel escapes and sets the lair to self destruct, leaving the penguins to make a narrow escape.
Nigel then packs up to leave, promising to tell HQ of their success. He then tells Private that for a moment, he was actually convinced that his nephew really loves plush. Skipper attempts to tell him the truth but Private cuts him off, claiming that he's just proud of his uncle.