At the Sheriff's Station, David is with Emma and hopes aloud that Kathryn's okay. Emma tells him that he needs to start thinking about himself, "Your wife is missing. You're in love with another woman. There is this unexplained phone call--" He knows but can't explain the call. She tells him she's pretty good at spotting a liar and doesn't think he is. Then she sends him home but not before telling him he might want to think about getting a lawyer.
It's evening at Granny's Diner, where Ruby is talking to August who's sharing stories of his travels with her. Ruby is engrossed with his tales about Nepal and lemurs but Granny isn't. She tells Ruby to stop flirting and calls her over.
In Fairy Tale Land, Peter, a fairy tale bad boy, all swagger knocks on the wooden shutters of a cute fairy tale cottage. Red opens the shutters, is happy to see Peter but tells him to keep his voice down because Granny is in the next room, who he knows doesn't like him. They're clearly smitten with each other. Peter tells her Granny is holding her back and she has to leave. He's a blacksmith's boy and could get work anywhere. She's happy and surprised he'd leave everyone he knows for her, "You'd do that for me?" Peter tells her with all sincerity, "I'd do anything for you." From the other room Granny calls for Red. She leaves Peter with a kiss and goes to Granny. Granny is at the door trying to convince the blowhard Mayor Tomkins and a posse of townsmen not to go looking for wolf. Red wants to go with them but Granny tells her she's staying and keeping her red hood on because it repels wolves. After Granny shuts the door, Red hopes they kill the wolf so they can get their lives back. Granny says she just wants to roam around the woods with that wastrel, Peter. Red defends him but Granny is still dismissive. Then the both of them start locking down the cottage. The door is barred, the windows are padlocked and iron bars are locked over the fireplace. Granny sends Red into the bedroom and orders her to wear the hood. As Red closes the door to the bedroom, Granny settles into her chair and sets a huge crossbow on her lap. Granny means business and aims the crossbow at the front door.
Back at Granny's diner in Storybrooke, Ruby is upset that Granny embarrassed her in front of everyone by telling her to stop flirting. Granny tells Ruby she wants her to start working on Saturday nights. She adds that business is booming and she wants to start training Ruby on how to do the books and reorders. Ruby isn't happy about it, thinks it is punishment for talking to August. Granny tells Ruby if she wanted to punish her she has better reasons, "For one thing, you were late. For another thing, Liza, you dress like a drag queen during fleet week." Ruby gives it right back, "And you dress like Norman Bates when he dresses like Norman Bates's mother." Granny tells Ruby she's a grown woman and needs to stop acting like a kid. Ruby thinks she just wants her to act like her, but she wants to have adventures. Granny is done with the discussion and tells Ruby that while Ruby works for her, she's going to listen to her. Ruby becomes exasperated with Granny and quits, then storming out.
It's the next morning in Fairy Tale Land, Red wakes up to find Granny still awake with the crossbow on her lap. They open up the cottage and Granny tells Red to check if the wolf left the chickens alone. Before she's out the door Granny reminds her to wear her hood. Out in the chicken coop, Red is collecting eggs and checking on the chickens when she finds Snow White hiding out there. Snow explains that she hid there because there was something howling outside last night. Red is sympathetic and kind. Snow can't give her real name because someone is looking for her, so she tells Red to call her "Mary". Red has Snow/Mary go with her to get some water before they go inside. She explains it's wolftime and that the noise was from a killer wolf as big as a pony that's been stalking the area. As they attempt to get water they find what's left of the Mayor's hunting party - their throats have been torn out and the ground is soaked with their blood.
Back in Storybrooke, Mary Margaret catches up with Emma walking down the street. She asks how David is doing and if Emma has found out anything about Kathryn. Emma tells Mary Margaret that some people are going to think her and David had something to do with Kathryn's disappearance. She also asks her if she can remember anything that will help David out. Mary Margaret says they weren't together. As they're walking they come across Ruby talking to a lecherous Dr. Whale. After he sees Mary Margaret and Emma he leaves. Ruby has a suitcase and explains she had a fight with Granny so she quit her job and now plans on taking a bus out of town. Mary Margaret and Emma convince her to stay with them for a little bit so she can figure things out.
In Fairy Tale Land at the town hall, the Mayor is still full of bluster about the wolf when Granny interrupts him. Snow, Red and Peter watch as Granny tells the story about when her father and seven brothers were killed by a different wolf when she was a child. She shows the townspeople proof -- the bite mark on her right arm. She tells everyone they can't fight it because they'll lose. They just need to hide. Later, back at the cottage Red tells Snow she feels like a rat in a cage and that she wants to run away with Peter. Snow tells her Granny's wrong for using the fear of the wolf to keep her away from Peter. Red comes up with the idea to track the wolf down in the daytime while it sleeps and kill it. Snow is reluctant but Red succeeds in pressuring her to go along.
Out in the woods outside of Storybrooke, Mary Margaret is looking for Kathryn when she comes upon David. He looks rumpled, dirty and curiously blank. All he says is, "I'm looking." Mary Margaret tries to reassure him that Emma doesn't think he did anything. He just continues to look around blankly, "I'm looking." Mary Margaret senses something's wrong but when she tries to get David's attention he stares through her blankly and heads off into the woods. She calls after him to no avail.
In Fairy Tale Land, Snow and Red track the wolf. The tracks they find are huge. Red with her bow and arrows is full of confidence but Snow is apprehensive. She mentions that Red is good at tracking. Red smiles and leads them on, "When there's something I want, I'm good at tracking it down."
At the Sheriff's Office, Henry is on the computer as he tries to help Ruby find a new job. When the non-emergency phone line rings, Ruby begins to answer the calls enthusiastically. She solves a minor problem with one of the townspeople as Emma walks in to see it. Emma tells her she has some extra money in the budget and that Ruby could answer phones and help out around the station. Ruby is thrilled and jumps at the chance. As she leaves to get lunch, Mary Margaret walks in with a concerned look. She tells Emma that David is in the woods and something's wrong with him, "It was like he was a different person."
In Fairy Tale Land, Red and Snow are tracking the prints in the snow when Red stops. Snow asks her what's wrong. Red points out that the tracks have changed from wolf to half-wolf and half-boot. Then Snow notes it changes to all boot and continues on like a man. Red wonders aloud, "Like it was a man and a wolf." Snow asks Red, "What kind of monster is this?" The share a look, then stare back at the prints. Red and Snow continue to follow the print, then Snow realizes the tracks lead back to the cottage and Red's window. Snow asks who's gone to her window. Red gets visibly upset and Snow gently prods, "Is it Peter?" Red says he was at her window last night before the killings. She says he wouldn't kill anyone but when the wolf takes over -- her voice trails off knowing what that means. Snow mentions the hunting party going out tonight, Red, "They're going to kill him. Or he's going to kill them." Snow tells Red that she can save Peter by telling him what he is and presses her to act. Red is reluctant at first then finds the strength, "You're right. I have to."
Back in Storybrooke, Ruby walks up to Granny's to pick up lunch for Emma but stops before going in. She gathers her confidence and heads inside. Granny takes her order of two grilled cheeses as Red inflates her job and importance at the Sheriff's Office. Her confidence wavers under Granny's matriarchal stare. She tells Ruby, "I hope you find what you're looking for." Ruby tries to stay stoic, "I am."
In Fairy Tale Land, Red tells Peter that he's the wolf. He's skeptical, but eventually comes to believe Red. Red tells him it will be okay, she can tie him up during the wolfstime. He gives her some chains to tie him up and then tells her once they're secure she should go. Red won't leave him, "No. I'm staying with you. I'll stay with you all night. And for all the nights to come." Peter is surprised and asks if she'd do that for him. Red echoes what he said to her earlier, "I'd do anything for you."
At the Sheriff's Station, Henry locks up his storybook in Emma's desk while telling her that Ruby is Red Riding Hood and that she should let her do more. Henry exits and Ruby enters with lunch. She looks defeated and Emma picks up on it right away. Emma decides to take her on a wilderness search. Later, in the woods, Emma and Ruby walk on trail when Ruby says she hears him. She takes off into the woods with Emma right behind her. Ruby finds David lying unconscious on the ground. Emma comes up and rouses him awake. David has no idea where he is or how he got there. He doesn't remember anything since we was at the Sheriff's Station the previous night.
Later at the hospital, Dr. Whale checks out David and tells Emma that whatever caused the blackout this time is the same phenomenon they observed right after he came out of the coma, "Moving around, acting out, not remembering it later." After Emma asks how functional David would be under these episodes, Dr. Whale tells her people could do all sorts of things, cooking, talking, even drive a car. David realizes quickly that Emma wants to know if he was capable of making the call or doing something more serious to Kathryn like kidnapping or killing her. Emma and Dr. Whale tell him no one is saying he did anything bad. David thinks it explains why it didn't seem like he was lying. Just then Regina enters and tells David to stop talking to Emma. She lays into Emma for not getting him a lawyer and not reading him his rights. Emma points out he's not under arrest. Regina tells her to get back out there and find Kathryn. Emma calls Ruby at the Station and tells her to take her bug to the toll bridge, which is the last place David dreamwalked. Ruby is hesitant but goes. Out at the toll bridge, Emma guides her on the phone. Ruby wants to know what she's looking for, Emma tells her to look for anything out of the ordinary and to follow her instincts. Ruby goes down to the shoreline and lifts up a piece of plywood that's covering up some recently disturbed dirt. She takes a piece of driftwood and digs in the dirt to find a box that was buried. Emma tells her she's looking for anything of Kathryn's. When she opens the box, whatever is inside makes her scream. She immediately she closes the box in horror.
In Fairy Tale Land, when Granny comes in to wake Red she uncovers Snow pretending to be her. Snow is wearing Red's hood and is lying in her bed. Granny is livid. Snow tells her Red's in no danger. When Granny finds out that Red's with Peter she goes off on Snow, "You stupid careless ridiculous girl." Snow tells Granny that Peter is the wolf but that he's still human. She tells Granny not to worry because he's tied up and can't hurt Red. Granny is horrified, "Oh, that poor boy." Then she's off. Out in the forest, Peter is chained to a tree and pleads with Red, who's now the wolf and about to strike. Peter, "Red! No! Red! It's me Red! Don't please!" Despite his pleas the massive wolf attacks the chained up Peter.
Back at the Sheriff's Station in Storybrooke, Ruby is still upset by what she found. Emma confirms what they think it is. Emma tries to tell her that she did good, "First you found David, now this. You say you don't know what you are, well whatever it is...? I gotta say, I'm impressed." Ruby tells her not to be because she was scared out of her mind. A bolstered Ruby forces a smile.
Out in the forest in Fairy Tale Land, Snow and Granny search for Red and Peter. Snow learns that Granny knew Red was a wolf. When Snow asks why Granny kept it from Red, she tells Snow because she didn't want Red to have to live with that burden. Granny tells her that Red's mom was a wolf but a hunting party killed her and Red started turning when she was thirteen. She tells Snow that she got Red's hood from a wizard, it's supposed to keep her from changing but she never wears it. Granny was turned by Red's grandfather and can still use her sense of smell even though everything else has faded away. That's how she's tracking Red. Snow and Granny come upon Red as a wolf. The silver tipped arrow drops Red when she tries to attack. Granny tells Snow to throw the magical red cloak over the wolf. Red turns from a wolf back to her human form. She's devastated when she learns that she is the wolf and that she killed Peter. They can hear the hunting party in the background getting closer. Granny tells Red she was wrong for keeping knowledge she was wolf from her but now she has to run. Snow helps a disconsolate Red get away into the forest.
At Granny's Diner, Ruby returns to ask Granny if she can get her job back. Granny asks why, "You were pretty mad." She tells Granny she wasn't mad, she just wasn't sure she could take on the added responsibilities Granny was asking. Ruby says she doesn't know how to be like Granny, she's a tough act to follow. Granny smiles at the compliment from her granddaughter. Ruby says, "I was scared." She tells Granny she found someone in herself that was more that she expected. Granny asks, what about the adventures Ruby said she wanted to have? Ruby says she had her adventure with Emma and she's done with that. Now she wants to do something that makes her happy, somewhere she loves, there at the diner. Granny confesses that she only wanted Ruby to learn how to do the books and everything so Ruby could take over when she retires and own the whole place. Ruby is surprised, "Own it?" Granny smiles at her granddaughter, "Sure, I mean who else would I give it to besides someone who loves me back." Ruby gives Granny a big hug. Granny hugs her back, then goes back to work. As she walks away she tells Ruby, "I'm proud of you." Ruby asks what was that and Granny tells her, "You heard me." Ruby's back at the diner and is all smiles.
At the Storybrooke Pet Shelter, Mary Margaret tries to comfort David who's upset about not being able to say anything about his actions because he can't remember them. Mary Margaret says there has to be an explanation. David says she's right but the problem is he doesn't think it's a good one. Just then Emma walks in. She tells them they found a box with a human heart in it and thinks it belongs to Kathryn. David is devastated and Mary Margaret quietly suggests that Emma should leave as she goes to comfort David. Emma tells them that there is more. They found fingerprints on the inside of the box. When she ran them against everyone in town, there was a match. David thinks he was the match and gets up, "Arrest me." Mary Margaret tries to calm him down, "David -- no --" He's up now, insistent, "Arrest me. Emma, do it." Emma stands there stoic, "David, the finger prints weren't yours." He's confused but before relief can begin to set in, Emma drops a bombshell, "They were Mary Margaret's." Mary Margaret is stunned. David looks over at her in shock. Mary Margaret has all eyes on her now.
Fairy Tale Land, deep in the forest the Queen take the children to the edge of the forest, near the home of the Blind Witch. After being asked what she was holding around her neck, Gretel tells the Queen it is the compass her father gave her so she could find him. Then the Queen asks Hansel and Gretel to steal back something of hers, something she needs to defeat a wicked and powerful enemy. It's in a black leather satchel inside. When Gretel asks why she doesn't get it herself, the Queen says the house is protected by magic but it doesn't work on children. If they do this for, she'll help them find their father. The Queen gives them one finally warning, telling the witch's house is unique, "No matter what you do, no matter how you're tempted -- don't eat anything." She pulls back some branches to reveal the most delicious looking gingerbread house ever.
At the Sheriff's Station back in Storybrooke, Henry pulls out his storybook and tells Emma he knows who the kids are. They're Hansel and Gretel to which Emma doesn't believe. Henry then asks her about his dad. Emma tells him he was firefighter she met when she was young. They lost touch and she tried to contact him before Henry was born but she found out he died saving a family from a burning apartment building. This hits Henry hard. When he asks Emma if she has anything he can have of his father, she tells him no. But she instantly jumps up, suddenly having an idea on how to find Ava and Nicholas's father. Emma's back at her apartment asking the kids if they have anything of there father's. Ava gives her a compass, the same one she had as Gretel in Fairy Tale Land. Emma promises to find their father.
It's nighttime back in Fairy Tale Land as the children creep up to the Blind Witch's gingerbread house. They enter the house through the window to find the inside full of irresistible treats. Gretel reminds Hansel of the Queen warning, "Not even a lick." As Gretel gets the satchel, she turns to watch as Hansel is overcome by temptation and takes a huge bite of a cupcake. Instantly, the Blind Witch is roused from her sleep as the fireplace roars to life revealing a pile of children's bones. As the children attempt to flee the door locks and window they entered slams shut. There is no escape and the Blind Witch approaches, "I smell dinner."
In Storybrooke, Emma asks Mr. Gold to see if he has any information about the compass Ava gave him. He tells her that he knows of the piece, it was brought in his store. When she asks who bought it, Mr. Gold says off-hand no, but he keeps extensive records. He goes to his files and pulls out an index card. Emma asks what the price for the information. He tells her forgiveness. She offers tolerance. Mr. Gold smiles, "Well, that's a start. The compass was purchased by a Mr. Michael Tillman." As Emma leaves we pull back to the index card Mr. Gold read the name from -- it's blank. Later, she finds Michael Tillman at his repair garage. He doesn't want to believe that he has twins. When he asks Emma why she thinks he there.