This episode starts out with Twilight Sparkle and Spike cataloging the various types of magic Twilight can perform. She explains to Spike that most unicorns only have mastery over a magic that relates to their special talent, if a unicorn's special talent is magic then they may be able to perform even more magic than usual. Their conversation is interrupted by Snips and Snails, two young unicorncolts that are on their way to see a new unicorn that has recently arrived in Ponyville, The Great and Powerful Trixie. Trixie claims to know more magic than any other unicorn so Spike and Twilight follow Snips and Snails to the show. They join up with Twilight's friends at the front of the crowd and listen to Trixie's show, which seems comprised of boasting and simple magic tricks. Spike keeps trying to say that Twilight is much better at magic than Trixie but Twilight stops him, scared that her friends won't like her anymore if she becomes a show off like Trixie.
Trixie claims that she has vanquished the dreaded Ursa Major and can out-do any pony in anything. She picks Applejack out of the crowd and challenges her. Applejack wows the crowd with lasso tricks, and Trixie retaliates by hog-tying Applejack with her own lasso. To avenge Applejack, Rainbow Dash launches into an array of dazzling aerial stunts before landing on stage and creating a small rainbow to appear over her. Trixie magically manipulates the rainbow to wrap up Rainbow Dash and spin her around until she becomes dizzy. Trixie then creates a black raincloud and zaps Rainbow Dash with lightning. The friends then agree that the best pony to stand up to Trixie is another unicorn, prompting Rarity to challenge Trixie next by lecturing Trixie about proper unicorn decorum and she also turns one of the curtains from Trixie's stage into a dress. Trixie decides to turn Rarity's mane a hideous shade of green as punishment. Spike begs Twilight once more to show the more boastful unicorn up but she runs away instead.
Later on Spike encounters Snips and Snails bringing Trixie a drink and they tell him again about how amazing Trixie is for defeating an Ursa Major. Spike claims that there is no proof that Trixie has done any of the things she has claimed. This gives Snips an idea and he and Snails go to the Everfree Forest to try and find an Ursa Major. They wake one up accidentally and it chases them to Ponyville crushing everything in its path. Snips and Snails run to Trixie to have her vanquish it while Spike tries to get Twilight to help. Trixie tries to subdue the Ursa but only ends up making it more upset and finally admits that she made the whole story up to make herself look better.
Determined to save Ponyville even if it means loosing her friends, Twilight summons a combination of spells including a lullaby, a very large bottle of milk, and a levitation spell to take the Ursa back home. Twilight's friends congratulate her on her quick thinking and knowledge of magic, letting her know that they appreciate her talents and her humility. Twilight then reveals that the Ursa Major was really an Ursa Minor, and that it is impossible to defeat a full sized Ursa all alone. Trixie takes this an opportunity to insult Twilight and then run away from town in a cloud of smoke.
Snips and Snails have to clean up the mess made by the Ursa Major but along with Spike, are given temporary magical moustaches by Twilight.