Super-snitch Julius notices that his car is being followed. He calls Dan, who tells him to make a sharp right turn, which traps Julius in a dead-end - and the car following him catches up. Julius drops Dan's name, but the pursuer identifies himself as Guthrie from Internal Affairs and says that Dan is exactly who he's after.
When Jack and Dan arrive at the station, Guthrie is waiting. He's had previous run-ins with Dan and is now re-investigating an explosives smuggling case. Dan says it wasn't his. (Flashback to 11 months earlier: Julius and Dan watch the smugglers load explosives into a van. Julius snitched them out before realizing that they were really dangerous; fearing for his life, Julius called an off-duty Dan for help. So Dan fires a shot into the van and . . . boom!)
While Guthrie interrogates Dan, Jack asks Liz for legal help. But she's a prosecutor, not a defense attorney, and she advises Jack to keep their personal relationship secret. Meanwhile, Guthrie orders Dan to spit out his chewing gum, which he collects, theorizing that Dan's DNA will appear on chewing gum found at the explosion scene - and evidence not presented at their trial will set the convicted smugglers free. Guthrie then pulls rank and takes over Lt. Ruiz's office for his base of operations, which she hates.
In prison, smuggling leader Pike tells his two thug partners that they'll be released and orders them to kill Julius. (Pike will remain incarcerated on a second charge.)
Meanwhile, Julius is trying to make time with a girl at his bar, and he's ignoring Jack's warning calls. Once Jack and Dan arrive, Jack notices a suspicious package on the bar, opens it, and discovers a bomb. (Flashback to a blind gun shop owner - and his five-year-old granddaughter - selling the thugs explosives and sniper rifles.)
The two thugs, who've been watching from across the street, detonate the bomb by remote control, but it doesn't work immediately, and Dan, Jack, and Julius escape the explosion and head for the station.
But Guthrie won't protect Julius unless he testifies against Dan, which Julius won't do, causing an argument that Ruiz interrupts by assigning Jack and Dan to a small-time case, though the case folder also contains a note to meet her later. When they do, Samantha and Julius are there, too, and they agree to work together to get rid of Guthrie.
Samantha discovers that the residue from the latest bomb matches the explosives being smuggled and that the seller is in their database from a previous bust. When Jack and Dan interview him, he says didn't see anything - after all, he's blind. Meanwhile, Julius calls Jack from Jack's apartment and, once Jack and Dan leave, the granddaughter - who overheard the conversation - tells the blind dealer everything.
A lab tech tells Guthrie that he found a bullet fragment in the debris from the van explosion, which he sent to ballistics but has gone missing. Guthrie notes that Pike's conviction has been overturned and when he's released, Dan will make the mistake that Guthrie's been waiting for.
Jack returns to his apartment, finds it's been ransacked - and Julius is gone. Jack calls Dan, learns that Dan took Julius to visit the girl from the bar. (Flashback to the thugs breaking in - seconds after Julius and Dan left - and trashing the place.)
Guthrie confronts Samantha and accuses her of hiding evidence, warning that she'll be fired for this. Meanwhile, Jack and Dan persuade Ruiz to hide Julius at her place. When Jack and Dan return to the station, Guthrie informs them about the bullet fragment and takes their guns away. Then he interrogates Jack - and discovers a picture of Liz and Jack on Jack's cell phone. Meanwhile, Pike gets out of prison, meets his thugs, and orders Dan killed.
After threatening Liz with disbarment for obstruction of justice, Guthrie gets a warrant to search Dan's trailer. Then one of the thugs feeds Samantha a story about being hired to fix Dan's air conditioning and having lost the address, which she gives him.
While Samantha tells Jack and Dan about sending the fake repairman to Dan's trailer, Liz calls, saying Guthrie's heading to the trailer with a search warrant. Guthrie arrives and starts searching, as Pike and the thugs - one of whom has a bomb - watch and decide to shoot him instead.
But Jack and Dan are also watching, and Dan has brought his "Sunday gun" (which he used to shoot the van). When Dan phones Guthrie to warn him, the thugs start shooting. Dan tells Guthrie to use the escape hatch under a rug. As Pike and a thug blaze away, Jack and Dan sneak up from behind and capture them. When Guthrie crawls away, the other thug gives chase and Dan shoots him, causing the bomb he tossed to land under the trailer. Boom!
As a heartbroken Dan surveys the wreckage, Guthrie tosses the bullet fragment into the ruins. Case closed. They're even now, but . . .
Jack and Dan return to the station. Samantha has been rehired. Ruiz is back in her office. Dan says he's learned that when he breaks the rules, it puts the people he cares about in danger - but it's worth it because that's what makes him a great cop. He calls for a group hug, which Ruiz breaks off, saying, "Let's go bust some punks."