Ondina, Mimmi, and Evie are enjoying life on the Gold Coast without Sirena, who has gone on a vacation with her sister, Aquata, in Hawaii. Ondina is given the task of teaching a class of younger mermaids in mermaid school. When one of her students wanders off, Ondina goes looking for her and witnesses an unidentified mermaid freeing the student from a fishing net. The mermaid later reveals herself to be Weilan, an Eastern mermaid from China. Due to Weilan's sassy attitude, Ondina immediately dislikes her while Mimmi shows Weilan around and introduces her to their friends. Later that night, the mermaids encounter a terrifying water dragon. They escape when Joe and David unwittingly distract the dragon with their boat. Weilan explains that the dragon's sole purpose is to destroy all mermaids.
Tension between Ondina and Weilan grows when Weilan makes a mess of Rita's grotto and Ondina blames her for leading the dragon to Mako Island and endangering the pod. At the marine park, Mimmi is reunited with Chris, who has returned from the dolphin training program in America. He introduces Mimmi to Karl, whom he met in America. Meanwhile, Joe informs the marine park of the dragon he saw last night. The park director sends Chris and Karl out to Mako to hunt for the dragon, putting the mermaids' secret in jeopardy. Chris finds the Moon Pool and Ondina barely manages to avoid being seen. The mermaids eventually use their powers to convince Chris and Karl that the dragon Joe saw was a waterspout. Afterwards, Ondina and Weilan make peace with each other.
Weilan enrolls at the local high school and becomes Zac's study partner after he fails an exam. Desperate to pass his next exam, Zac begs Weilan to use a knowledge transference spell to transfer her knowledge of biology to Zac's mind. The spell doesn't seem to work at first but when Weilan and Zac wake up the next morning, they are horrified to find that they have swapped hair with each other. While taking the exam, the knowledge transference takes effect and Zac easily passes the exam, making the teacher suspect that he may be cheating. Rita decides that the best way to settle this is to have Zac retake the exam. Things soon get worse when Weilan and Zac swap voices and slowly begin swapping the rest of their bodies with each other. Mimmi and Ondina eventually reverse the spell and return Weilan and Zac to normal. Zac retakes the exam and passes it on his own.
Ondina begins giving Evie lessons on how to use her moon ring to telekinetically manipulate objects. Later, at her home, Evie uses her moon ring to manipulate a mop to clean the floor for her. However, things get out of control when the mop develops a mind of its own and runs wild throughout the house. Evie, Zac, and the three mermaids must stop the animated mop before Evie's father comes home. Meanwhile, because Joe owns a share of the café, he announces his decision to close the café to save money despite protest from David, Zac, and Cam. To save the café, Cam uses his savings to buy Joe's share of the café making him the co-owner of the café along with David.
Weilan suggests using a Chinese puzzle box and enchanting it with a containment and shrinking spell to trap the water dragon. She and Ondina search for one at a flea market and eventually are able to purchase one from an antique dealer named Shen. The enchantment does not seem to work at first but later that night, the box activates and sucks in Poseidon. When Weilan takes the box to school, their science teacher gets too close to it and is also sucked in. Weilan later opens the box and frees both Poseidon and the teacher, who, fortunately, has no memory of being trapped in the box. The girls decide the box is too dangerous to use and destroy it. Meanwhile, Carly suggests that she and Cam take dance lessons which Cam reluctantly agrees to. However, Cam inadvertently hurts Carly's feelings when he calls her idea "stupid" and she overhears it. To save their relationship, Cam takes dance lessons from Zac and asks Carly to dance with him at the café which she happily agrees to.
At the marine park, a team of rescuers, including Chris, goes out to rescue a pod of stranded dolphins, leaving Karl and Mimmi to work the various jobs around the park. Mimmi soon becomes worried about a seemingly sick dolphin. After communicating with it, she learns that the dolphin is in distress because she is in labor and wants help from another dolphin. After convincing Karl to help, the baby dolphin is successfully born. Chris grows more interested in Mimmi when Karl tells him about her knowledge of dolphins. Meanwhile, Evie pushes Ondina to teach her some more advanced spells with the moon ring. When Evie tries using the spell, she accidentally suspends Ondina and Weilan in midair. Evie tries but fails to get them back on the ground. She loses her confidence, panics, and runs off to find Mimmi, leaving Ondina and Weilan floating in the air. The two are forced to set aside their differences and work together to break the spell and get back on the ground.
As the mermaids prepare for their next encounter with the dragon, Weilan demonstrates a powerful Eastern mermaid spell called "Turn the Tide" which reflects any magic aimed at the spell-caster back to where it came from. Zac and Ondina are both determined to learn it and struggle in their efforts. Meanwhile, Mimmi volunteers herself and Ondina to cover for David while he works on a group science project. The two run into trouble when Joe shows up in the middle of Ondina's efforts to figure out Weilan's complicated spell on her own.
On the night of the full moon, the pod is determined to defeat the water dragon. Veridia, however, tasks Ondina and Mimmi with watching over the younger mermaids instead of fighting with the pod. Unhappy with being left out of the action, the two decides to disobey Veridia's orders and join the fight. Meanwhile, Zac and Weilan prepare to carry out their plan to have Zac lure the dragon into the Moon Pool before using "Turn the Tide" to counter its fire breath. To get the pod out of the way, Weilan lies to Veridia, claiming the best course of action is to hide on the west side of Mako to catch the dragon off guard when it will actually appear in the east where the moon rises. Knowing Evie will try to stop him if she finds out what he's up to, Zac enlists Cam to keep her occupied until he returns. Unfortunately, Evie decides to join the pod in the fight and she enlists Carly to perform the same task as Cam. Later, Evie notices Zac and Weilan together and realises they are up to something. When Weilan finally tells Evie about their plan, she frantically swims off to the Moon Pool after Zac. The dragon soon appears and chases Zac into the Moon Pool where he finds Evie. Meanwhile, Mimmi finds out in horror what Zac is doing when she has a vision and Ondina realizes that Weilan had deceived them. Alone, Zac and Evie face off against the dragon. In the end, Zac fails to destroy the dragon and Evie is struck by the dragon's fire breath, causing her to lose both her tail and her powers. Instead of finishing Zac off, the dragon merely sniffs him and then leaves. Afterwards, Ondina furiously berates Weilan for lying to the pod and causing Evie to lose her tail and she runs off in utter shame. Heartbroken over the loss of her tail, Evie goes home after declining Zac's offer to walk her.
Weilan overhears Ondina blaming her for Evie losing her tail and she runs off deeply hurt. She later runs into Shen and tearfully admits to him what had happened and that she plans to leave the Gold Coast for good. Shen attempts to comfort her and explain that running away from her problems will not fix them. Weilan decides to leave anyway in the hopes that the dragon will follow her like it did before. Meanwhile, Ondina and Mimmi tries using a spell to make Evie a mermaid again. However, the spell backfires, leaving Ondina unable to get her legs even when she's dry. As Weilan prepares to leave, Ondina stops her and apologizes for being too harsh on her and also convinces her to stay. The two reconcile and Weilan is able to restore Ondina to normal with some Eastern magic. Evie eventually returns her moon ring to Rita and decides that, although she will miss being a mermaid, she should reap the benefits of being an ordinary girl again. She then goes diving with her dad, something she has been unable to do since becoming a mermaid.
Zac finds a seemingly ordinary but beautiful seashell while swimming out on the reef. Later, when the mermaids visit Zac and see a picture of him from when he was younger, a nostalgic Zac casually wishes that they could have seen him from those days. The seashell suddenly sends the girls five years back in time where Zac is younger. When young Zac asks who they were, Weilan tells him that they're aliens. Confused, the girls leave and meet a younger Rita who does not recognize them. After realising that it was the shell that sent them to the past, they return to Zac's place to search for it. Meanwhile, in the present, Zac finds himself in an alternate world where Cam and Evie are a couple, Rita has moved away, and everyone believes him to be an alien obsessed nerd. Back in the past, the girls manage to find the shell, but young Zac begs them not to leave and an impatient Ondina hurts his feelings. The girls talk to young Rita again and convince her that they're from the future and she tells them how the shell works. Rita reveals that the shell is a wishing shell and only the person who found it can use it. The girls find young Zac at a birthday party for young Evie and ask him for his help after Ondina apologizes for being mean to him. When young Zac begs them to prove to the other guests that they're aliens, they feign ignorance and young Zac is humiliated. Mimmi apologizes to young Zac for this and saves young Zac's reputation with a brief magic show with her powers. Young Zac then uses the shell to send the girls back home and restore the present to the way it was.
Ondina and Weilan takes a class of young mermaid onto Mako Island to teach them how to walk on two legs. One of the mermaids named Amaris quickly gets the hang of walking and wanders off on her own to explore the island, forcing Ondina to go search for her. To make matters worse, Chris and Karl are sent to observe some sea turtles on Mako Island, right where Ondina and Weilan are teaching their class. Mimmi heads to the island to warn them of Chris and Karl's impending arrival and Weilan sends the other young mermaids to safety. Amaris soon runs into Chris and Karl and runs away frightened. As Chris, Karl, and the mermaids search for her together, Amaris continues to hide, fearful of interacting with land people. She then falls into the land entrance to the Moon Pool and is able to swim back to the beach where Ondina finally finds her. Amaris then apologizes for worrying everyone and promises to never wonder off on her own again. Meanwhile, Cam suggests modifying the recipe of the cafe's most popular burger to save money but David is against the idea. To resolve the matter, they ask Zac to act as their taste tester for the burgers. Ultimately Zac declares that the burger should be left alone.
When Chris finally asks Mimmi out on a date, she happily accepts. Although Weilan is delighted for her, Ondina is completely against the idea. As Mimmi enjoys a day at the beach with Chris, Ondina follows them in an attempt to protect her despite Weilan's insistence to back off. As Mimmi and Chris are about to kiss, Ondina creates a rainstorm forcing Mimmi to flee. Later, Ondina admits to Weilan that she ruined Mimmi's date because her own previous relationship with Erik ended in heartbreak and she does not want to see Mimmi suffer the same way. After comforting her, Weilan convinces Ondina that Mimmi needs to be free to make her own decisions. Although Ondina admits what she did and apologizes, Mimmi decides to not pursue a relationship with Chris out of guilt for lying to him. Meanwhile, Cam attempts to change the image of the cafe in order to attract more sophisticated and wealthier customers despite hesitance from Evie, David, and Carly. As they try to arrange a formal party, no one shows up much to Cam's disappointment. Carly convinces Cam that the cafe is fine the way it is and they draw in a crowd after making the party more laid-back. Weilan and Ondina get Chris and Mimmi to come to the party in an attempt to bring them back together. After steering away from the party to talk, Chris and Mimmi admit their true feelings for each other and finally become a couple after sharing a kiss.
Mimmi and Zac receive a vision of a mermaid whom Mimmi believes is their long-lost mother, Nerissa. Stunned to learn that Zac and Mimmi are Nerissa's children, Weilan reveals that she disappeared after facing a rebel mermaid named Aurora who threatened the Northern and Eastern pod. Zac and the other mermaids are hesitant to believe that Nerissa is still alive, much to Mimmi's frustration. Later, while watching Chris' football game with Ondina, Weilan, and Zac, Mimmi's moon ring glows and she is convinced that Nerissa is trying to reach out to her. Mimmi leaves the game to contact Nerissa, despite Zac urging her to let Nerissa go. Out at sea, Mimmi uses her moon ring in an attempt to reach Nerissa. To Mimmi's horror, the use of the moon ring summons the water dragon, which chases her into the canal. But instead of taking Mimmi's tail, the dragon spares her like it did to Zac before. Afterwards, Mimmi decides with a heavy heart that she must let Nerissa go for both her and Zac's sake. To give themselves some closure, Zac and Mimmi hold a memorial service in Nerissa's honour. Meanwhile, Cam's roles as both boyfriend and boss to Carly becomes frustrating and confusing to her. They attempt to find a balance with a system regarding two caps, but this proves ineffective. Cam eventually decides he would rather just be Carly's boyfriend and quits being the co-owner of the cafe. Later, Mimmi apologizes to Chris for bailing on him, but he starts to have some doubts about their relationship.
As Ondina continues to teach her mermaid class, she grows frustrated by her students' lack of interest. To liven the class up, Mimmi suggests showing them a spell that accelerates the growth of any living thing. Later, Weilan mistakes the growth spell ingredients for tea and offers some to Rita as she prepares for a job review to keep her position as principal, causing her to rapidly age into an old lady. After Rita tells them the ingredients for a reversal spell, Weilan and Ondina go to gather them while Mimmi keeps an eye on Rita. Rita reflects on her past and realizes that, although she had a fulfilling life on land, she misses her old life in the sea. Rita then realizes that she forgot one final ingredient for the reversal spell but has trouble remembering what it is. Meanwhile, the school board begins interviewing the science teacher for the principal job. Zac and Evie distracts the school board to buy Rita more time. Rita eventually remembers the final ingredient and the girls are able to complete the reversal spell to restore Rita to her normal age. Although Rita makes it to her review, she realizes how much she misses the sea and, to everyone's astonishment, quits her job as principal. Later, Veridia offers Rita a job in mermaid school and Rita takes Ondina's place as the teacher of the mermaid class.
The mermaids, along with Karl and Chris, attend a book signing at an exhibition for Secrets of the Deep, whose author had gathered lots of artefacts from incredible depths of the ocean. The author of the book turns out to be Rikki Chadwick from H2O: Just Add Water. A mysterious bracelet at the exhibition is noted to be associated with the Jiao Long Dragon. The mermaids go to Shen's antique store where Weilan examines the painting of The Legend of Jiao Long. The painting reveals a mermaid using the same bracelet from the exhibition on the dragon in the legend. The girls suspect that Rikki is a mermaid, whose recovered bracelet can defeat the water dragon. The girls inform her of their real identities and of the dragon, but Rikki turns the girls away, unwilling to give up the priceless artefact she struggled so hard to obtain. Meanwhile, Chris becomes suspicious of Mimmi's behavior and begins to doubt that Mimmi really likes him. In an attempt to get some answers, Chris talks to Zac who insists that Mimmi has nothing to hide and that she really likes him but Chris is left unsatisfied. Later, the mermaids enlist Zac to help them steal the bracelet. The heist ultimately fails and the girls are forced to retreat when the police arrive. Afterwards, Chris confronts Mimmi on her secrecy but when she refuses to tell him the truth, Chris breaks up with her. Special guest star: Cariba Heine as Rikki Chadwick
With the next full moon approaching, the mermaid council plan to unleash the full power of the Moon Pool to defeat the water dragon. When a clearer vision of Nerissa reaches out to Zac and Mimmi, they conclude that her spirit is trapped as the water dragon. Weilan learns from Uncle Shen that the bracelet actually broke the spell of a male human who was spelled as the legendary Jiao Long Dragon. Despite their pleas to use the bracelet instead of launching the power of the moon pool, Veridia denies Zac and Mimmi's request in fear of the pod being harmed. Meanwhile, Ondina and Weilan bond with Rikki as she shares her history with her and her friends becoming mermaids, eventually convincing Rikki to help steal the bracelet before it gets donated. With the bracelet on hand, Ondina and Weilan attempt to stop the council from using the Moon Pool while Mimmi and Zac confront the dragon, eventually restoring Nerissa to her true form. At the grotto, Nerissa reveals that an Eastern mermaid spelled her into becoming the dragon, unleashing a devastating attack on the Eastern pod, and then left into a deep sleep until Mimmi and Zac reunited. In the end, Zac contemplates informing his parents about his true origins, Mimmi reveals she's a mermaid to Chris and they get back together, Weilan is given a moon ring and intends to return to Shanghai to restart the Eastern pod with Ondina offering to join her and the girls invite Rikki to their pod (along with her friends). Special guest star: Cariba Heine as Rikki Chadwick