The TARDIS apparently materialises in London, 1951, near the Festival of Britain -- but there is a swastika flying above the Skylon, and when the Doctor and Ace investigate they find that the Festival which should be celebrating Britain’s recovery from World War Two instead celebrates the triumph of the Thousand Year Reich. The exhibitions include photographs of Prime Minister Oswald Mosley, and of the reinstated King Edward VIII and Queen Wallis singing a peace treaty with Adolf Hitler. Outside, the Doctor and Ace see two members of the Britischer Freikorps bullying the Jewish proprietor of a tea stall, and the Doctor, claiming to be a party official, bluffs them into returning to their unit and placing themselves under arrest. He and Ace then set off back to the TARDIS, but see a man being stabbed to death nearby; the dying man falls into the Thames after passing his documents on to the Doctor. Freikorps patrols arrive in the area, responding to the disturbance, and the Doctor and Ace retreat back to the Festival -- where an informer who overheard their conversation about the photographs turns them over to Lieutenant Hemmings of the Freikorps, claiming that they are resistance agents.

Hemmings throws the Doctor and Ace into a temporary cell in the basement of the Savoy, and tries to break their resolve with psychological tricks. They easily withstand them and escape back to the Festival, only to find that the TARDIS has gone. An elderly passerby named Popplewell tells them that it was taken by a Nazi patrol. The Doctor decides to examine the documents which he was given earlier, and finds that the murdered man was a Reichsinspektor General -- and that there is no photographic identification amongst the papers. He therefore returns to the Savoy and bluffs his way into a meeting with General Strasser, and by the time Hemmings arrives to report his prisoners’ escape, the Doctor has convinced Strasser not only that he is the Reichsinspektor General, but that he deliberately allowed Hemmings to arrest him and his ward in order to test their security. Strasser doesn’t want the Doctor to take a poor report back to Berlin, and thus agrees to give him all the help he needs to correct what are no doubt minor problems. Aware that the furious Hemmings doesn’t believe a word of his story, the Doctor requests that Hemmings be seconded to his staff in order to keep an eye on him. Their credentials now established, the Doctor and Ace are ready to find the TARDIS, research the alternate history of Nazi-occupied Britain, and find out where the timelines diverged -- and what, if anything, can be done about it.

The next day, the Doctor visits what was once the British Museum to study military records, while Ace is “released from prison” to hook up with a resistance cell. Ostensibly her mission is to infiltrate the resistance and learn about their organisation; in fact, her real agenda is to speak with a few ordinary people and learn about the history of the war. A kind old woman named Ma Barker invites Ace back to her cafe, but once there she is confronted by Popplewell, the elderly man from the Thames -- who is in fact the leader of a resistance cell, and the man who killed the Reichsinspektor General. Ace manages to convince him and Barker that she is a representative of the exiled British government, here to learn all she can about life under the Nazis in order to determine the strength of the resistance. Popplewell and Barker tell her that all “undesirables” have been deported to the death camps, all able-bodied men have been sent to New Berlin as slaves, and all blonde and blue-eyed women have been sent to the Race Centres as breeding stock. There are also rumours of a Black Coven which is said to influence the Nazi party’s inner circle, conducting evil rituals and human sacrifice. Before Ace can learn more, the informer Arnie arrives with a warning for Popplewell and recognises her from the Festival. He claims to have seen her and the Doctor talking with General Strasser, and Ace in turn accuses him of turning them in earlier. Popplewell and Barker, unsure who to trust, decide that they have no choice but to kill them both, but they are too late; Hemmings, convinced that the Doctor is trying to play him for a fool, has had Ace followed and is about to raid the cafe.

According to the museum records, the German army annihilated the British at Dunkirk, rather than allowing them to evacuate. As the Doctor considers his discovery, he senses a familiar presence in his mind -- and when he probes further, he is attacked by the enraged Timewyrm. Shaken, he puts up mental defenses to prevent this from happening again. He then returns to the Savoy, where he learns of Hemmings’ activities and alerts Strasser. Hemmings has just raided the cafe, but before he can place its occupants under arrest the Doctor arrives, claiming that Barker and her associates are double agents who were about to give Ace details about other resistance cells until Hemmings nearly bungled the operation. Strasser has the protesting Hemmings arrested, and departs to let Popplewell and Barker continue their fine work. After ensuring that Popplewell will be able to relocate and continue his fight, the Doctor and Ace return to the Savoy, where the Doctor sends Ace to wait by the TARDIS while he releases Hemmings; not even the sadistic Lieutenant deserves what will happen to him as a prisoner of the Nazis. Rather than thank the Doctor, however, Hemmings knocks him out and attempts to warn Strasser -- but before he can do so the TARDIS materialises before him, and the awed Hemmings steps inside and is transported away. Meanwhile, the Doctor recovers and heads back to his own TARDIS, only to be confronted there by Strasser and his personal guards; the body of the real Reichsinspektor has been fished out of the river, along with proper identification. Ace uses her new explosive concoction, nitro-nine-a, to bring down the wall on Strasser and his men before they can shoot the Doctor, and she and the Doctor enter the TARDIS and depart.

The Doctor confiscates the rest of Ace’s explosives and takes her to Munich in 1923, to lay the groundwork for the next stage. At this point in time, the Nazi party is still an insignificant street mob, and when Hitler tries to stage a coup he and his followers are easily driven away from the War Office by government soldiers. To Ace’s horror, the Doctor pulls the dispirited Hitler out of the fleeing crowd, tells him not to give up, and promises that he will return when Hitler rules a united Germany. Furious, Ace tries to kill Hitler as he departs, but the Doctor stops her, reminding her that the Nazi party will be destroyed in 1945 -- unless Hitler is replaced by somebody competent. As they return to the TARDIS, somebody shoots at them with an energy weapon, and they barely escape with their lives, now aware that the Nazis have definitely been infiltrated by someone who does not belong on 20th-century Earth.

The Doctor travels to Nuremburg in August of 1939, and after parking the TARDIS in the Time Vortex to avoid drawing attention to it, he takes Ace to a party rally. The audience responds enthusiastically to Hitler’s rambling and disjointed speech, and much to her surprise Ace finds herself responding as well despite the vicious anti-Semitism on display, suggesting that there are powerful psychological forces at work in the crowd. She and the Doctor are spotted and arrested, but the Doctor claims to be a personal friend of Hitler -- and when they are brought before the Fuhrer, he instantly recognises the Doctor as the man who restored his faith, and warmly welcomes him to Nazi Germany. The other party officials display their public support for Hitler’s friend, but Goering and Himmler are suspicious of the new arrival and determine to find out what his true agenda is. The Doctor, meanwhile, meets a party official whom he does not recognise from the history books -- the deformed Dr Kriegslieter, who seems to know the Doctor of old.

The Doctor attends a private audience with Hitler, and claims to have seen a future in which the Nazi armies will conquer most of Europe. But when he further predicts that the English will honour their treaty with Poland and declare war should Germany invade, Hitler flies into a rage, and his fury manifests itself as a telekinetic storm which nearly batters the Doctor to death. Unable to sustain the power flooding through him, Hitler collapses after speaking in the voice of the Timewyrm. As the Doctor and Martin Bormann tend to him, Bormann explains that the Fuhrer has experienced similar fits recently; in fact, only the Doctor has witnessed one and survived. The Doctor returns to his quarters, where he informs Ace that the Timewyrm has tried and failed to possess Hitler and is now mired within his madness, unable to escape. But the subtle, well-controlled changes to history that they have witnessed are uncharacteristic of the Timewyrm’s style. Something else is going on here.

Over the next few days, while waiting for Britain to declare war, Ace witnesses examples of the Nazi reign of terror and comes to understand the Doctor’s perspective; as brutal as the war will be, it must take place to ensure the end of the Nazi regime. Hitler sends his troops into Poland on schedule, and on the third of September the Doctor visits him to await word from England. Hitler remains confident that the British will concede to his demands, as they have always done before -- but at 9 am, a messenger arrives to announce that if German troops do not withdraw from Poland immediately, a state of war will exist between Germany and England. Hitler flies into another rage, but the Doctor helps him to calm himself, fearing the consequences should Hitler die, have a breakdown or impulsively order the immediate invasion of Britain. With great effort, Hitler manages to control the power flooding through him, and the Doctor sets off back to his hotel, assured that the war will begin on schedule.

Before the Doctor can depart, Goering summons him to a private meeting to discuss the Fuhrer’s condition. Should Hitler suffer a breakdown, Goering is prepared to take his place -- for the good of the Reich, naturally -- and he wishes to know if he can count on the Doctor’s support. The Doctor remains non-committal, but as he leaves he is arrested by the Gestapo and taken to Himmler to explain himself. He manages to convince the superstitious Himmler that he is in fact a master of the grand order of sorcerers which Himmler has sought all his life, and Himmler, delighted, invites him to visit the castle at Drachensberg to meet the sorcerers of the Black Coven who have advised him during his rise to power. The Doctor finally gets back to his hotel room, to find that Dr Kriegslieter has invited him to the Aryan Research Bureau -- and in his absence, the bored Ace has decided to accept the invitation herself.

Ace is disgusted by the Bureau’s collection of Aryan tracts, vicious racism thinly disguised as scholarship -- and she soon realises that Kriegslieter’s arrogant, bespectacled assistant is trying to hypnotise her in order to question her about the Doctor. She resists his control and tries to flee, only to be captured by Kriegslieter, who has an energy weapon built into his cane. By the time the Doctor arrives, the Bureau is deserted and the crystal ball in Kriegslieter’s office is showing an image of Ace -- who is apparently about to become the subject of a human sacrifice at Drachensberg. The Doctor contacts Goering and informs him that the Black Coven is trying to overthrow Hitler and put Himmler in his place, and then searches Kriegslieter’s office and locates a transmat unit. He transports himself to Drachensberg, where he surrenders to the Coven to save Ace’s life -- but he recognises the alien machinery being used by the Coven, and finally realises that Kriegslieter is the renegade Time Lord known as the War Chief.

Following the failure of the War Games, Kriegslieter was shot by his former allies, and in the confusion following the Time Lords’ arrival his subsequent regeneration aborted. He was taken back to the aliens’ planet as a medical curiosity, but over time he managed to convince them that his supposed betrayal of their leader was just a misunderstanding. With his help, the aliens broke free of the force field the Time Lords had set up around their world, and travelled back in time to infiltrate the Nazi party and influence them from behind the scenes. Their original plan had been to create an army from the human race’s finest soldiers, and they have found a ready-made army in the SS -- stormtroopers so lacking in humanity that the processing to make them serve the War Lords is barely necessary. Now, with the War Lords’ assistance, the Nazis will win the war and go on to conquer the galaxy, with the War Lord ruling behind the scenes. Ace will be sacrificed at a ceremony designed to impress Himmler, while Kriegslieter intends to possess the Doctor’s body and acquire a new, healthy Time Lord body with a full complement of regenerations.

Kriegslieter takes the Doctor to the ceremony to watch Ace’s death, but when Himmler arrives the Doctor informs him that the Coven is grooming him to replace Hitler. Kriegslieter is surprised by Himmler’s furious reaction; unlike the other Nazi officials, who place their own glory above all else, Himmler is fiercely devoted to his Fuhrer. While Kriegslieter is taken off guard, the Doctor asks for permission to sacrifice Ace himself, and Kriegslieter, assuming that the Doctor is trying to save his own skin, agrees to let him do so. Instead, the Doctor cuts Ace’s bonds with the sacrificial knife and creates a distraction using the nitro-nine-a which he had taken from her earlier. He and Ace flee into the castle’s corridors, and before Kriegslieter’s troops can pursue them Goering and his men arrive to investigate the Doctor’s earlier warning. The Doctor and Ace reach a vantage point atop the castle tower and fire a few rounds at Goering and his men, provoking them to fire back and instigating a fierce battle. The converted SS troops prove useless in battle, as they have no will of their own and thus no initiative, and Goering’s men thus easily overpower and destroy the Black Coven.

As the Doctor and Ace prepare to depart, Hitler arrives in person to investigate, and the Doctor senses a disturbing new vigour about him. He descends to the courtyard and informs Hitler that Himmler had discovered Kriegslieter’s treachery, and that Goering has just saved the Reich -- and the pleased Hitler then informs the Doctor that he has learned to control the power within him, just as the Doctor had taught him. The horrified Doctor realises that Hitler has achieved symbiosis with the Timewyrm, giving him a new strength of will and purpose which could lead him to victory. As Hitler departs with Himmler and Goering, the Doctor tries to work out how to deal with this new problem -- but before he can do so the mortally wounded Kriegslieter uses his telepathic link with the processed SS soldiers to reanimate their bodies and send them after the Doctor and Ace. As Ace holds off the attacking zombies, the Doctor sets the castle’s nuclear reactors to overload and summons the TARDIS from the Time Vortex. He and Ace depart moments before Drachensberg explodes, wiping out the War Lords’ technology and putting an end to their scheme for good.

The Doctor then wires the TARDIS telepathic circuits into an old storm lantern and takes Ace to Felsennest, Hitler’s command bunker, in May 1940. Just as the Doctor had promised Hitler, the Nazis have swept across Europe and driven the British back to the shores of Dunkirk, and Hitler is now poised to destroy them completely. The Doctor praises Hitler’s leadership skills, claims that he is solely responsible for the successful blitzkrieg and heaps scorn upon the pathetic contribution of the Timewyrm. Enraged, the Timewyrm attempts to tear itself free of Hitler’s body and destroy the Doctor -- and the Doctor uses the storm lantern to boost her power, freeing her from Hitler’s mind but banishing her into the Time Vortex in a storm of unfocussed energy. Hitler is reduced to a wreck by the experience, and the Doctor easily convinces him to let the remains of the British army escape, claiming that the grateful British will then see the truth of their Aryan heritage and ally themselves with Hitler. He and Ace then depart, leaving Hitler alone to fulfill his destiny.

Despite his apparent victory, the Doctor remains moody and pessimistic; he’s just set the most terrible war in human history on course, and hasn’t even succeeded in destroying the Timewyrm, who will eventually recover from this assault and strike again elsewhere. Ace convinces him to return to the Festival of Britain to see what he has accomplished -- and this time, all is as it should be. The British are recovering from the hardships of the war and celebrating victory, and as the Doctor and Ace watch, a policeman drives off two thugs trying to bully the Jewish proprietor of a tea stall. Cheered, the Doctor sets off with Ace to enjoy the festival for a while -- unaware that elsewhere in time and space, Lieutenant Hemmings is being indoctrinated by the Timewyrm, and prepared to take his revenge…