Helga is determined to get Arnold's hat in order to complete a sculpture she's making of him (made out of his chewed gum). When Arnold won't go out of his room without his hat, Helga attempts to get it back.
Arnold is seen flying onto a kite in the sky when he hears a voice saying "Hey Arnold" continuously. It was all a dream, and Arnold wakes up to find that his alarm clock has went off. He turns off the alarm and hops out of bed. He takes a shower, gets dressed, and eats breakfast, which is pancakes his grandmother serves him. Arnold is later at the park with Gerald trying to give the kite they make some improvement to make it fly. As they walk away, Helga sneaks from behind and takes a wad of gum Arnold stuck under the bench earlier. Helga goes to her house and uses the chewing gum for the nose of her sculpture of Arnold inside her room. However, Helga feels that something is missing from the sculpture, which is Arnold's hat.
While Arnold and Gerald struggle to make the kite fly, Helga attempts to swipe Arnold's hat off of his head. She scales the roof and tries to get the hat with a fishing pole, but ends up catching a delivery truck instead, which drives and drags her across the roof until she crashes into a pigeon coop, where a pigeon relieves itself on her. Meanwhile, Arnold has finally got the kite to fly by tying a balloon to it. Suddenly, a gust of wind picks up, blowing the kite away, as well as Arnold's hat, which lands by Helga's feet, much to her delight. She takes the hat and runs home. She places the hat onto the sculpture head of Arnold and dances around with the head.
Meanwhile, Arnold, depressed over the loss of his own hat, walks home and mopes into his bedroom. He reminisces how his parents first gave him his hat when he was a toddler. He wakes up from his memory to hear Gerald calling his name. Outside, Gerald asks Arnold to come outside, for the Jolly Olly Man is giving away free ice cream to the children. But Arnold refuses, saying he is not going outside without his hat. Helga, who is one of the children accepting the ice cream, overhears this and runs home to her closet, only to discover that her sculpture of Arnold is missing. She lets out a loud scream and runs downstairs to ask her mother what happened to her sculpture. Miriam tells her that she threw it away and Helga now has to locate the city dump to retrieve the hat.
Meanwhile, Arnold is inside his bedroom moping until his grandfather Phil comes in and tells him that even though his hair fell out, he was the same person that he always was inside. As Phil leaves, Arnold thinks about what his grandfather says and finally regains his confidence.
While Helga finally finds Arnold's hat in the dump, Arnold meets Gerald outside and Arnold has finally gain resilience form his depression. Helga then runs into Arnold and Arnold gets his hat back. He hugs Helga out of gratitude and Helga gets a warm feeling, only to revert back to her rude self and demand Arnold to leave, which he complies to happily. As Arnold leaves, Helga says that she will never wash her clothes again. As the screen fades to black, a pigeon is heard relieving itself on Helga, to which she replies "Yuck!"