Panty and Stocking arrive at school to find that a strict academic regime has been established by the mayor's daughters, Scanty and Kneesocks, who are running a factory that produces an army of fake ghosts beneath the school.
The episode starts with a few exploding ghosts, who, upon being killed, leave no Heaven Coin behind. Panty and Stocking complain in the bathroom, but after finding a non-replica looking ghost in there, they try killing it. The small ghost manages to escape, and flees through a toilet, splashing the angels with toilet water and saying that the ghost is a girl when Panty and Stocking thought that the ghost was a boy. Enraged, the Anarchy sisters attack the ghost once again, but the conflict lasted all night apparently, as it was morning when they decided to let it go and returned back to school. Shortly after, a student asks them why they weren’t wearing their uniforms. He then proceeds to explain that the new queens of Daten City High established a few rules they needed to follow.
Panty calls Brief, and asks him to explain what is going on. Brief tells them the new queens, who are actually demons and the mayor's daughters, bound the school with new rules and morals. The demon sisters arrive, and upon noticing Panty and Stocking, they comment on their stench. The Anarchy sisters tell them rules are boring and pointless, but Kneesocks goes off the handle and explains how rules are needed in order to solve the chaos of freedom.
While in the cafeteria, Panty and Stocking complain about the newly established healthy and tasteless menu. Scanty and Kneesocks sit beside the angels' table, and proceed to criticize them and their way of handling ghosts. Now completely enraged, the angels challenge the demon sisters, in order to prove who is better, but the demon sisters win in every category. The angels are sent to the losers' class, where they find the little ghost from the night before. The ghost tells them he knows where the demon sisters' hideout is, and that in order to go, they need to get inside a toilet.
It turns out the demons' hideout is in fact a ghost factory, which is the one producing the heavens-worthless ghosts the Anarchy sisters had been encountering. Garterbelt tells them to destroy the place, for a Ghoststone in there had been absorbing human evil for thousands of years. Scanty and Kneesocks find the Anarchy sisters, and both parties transform their respective clothes into weapons. Upon finding out Scanty and Kneesocks are actually demons, the ghost decides to join them instead, but is sliced by Kneesocks' scythe, which turned her into a bigger ghost. However, the ghost is killed easily anyway. Both parties prepare to battle, but Brief tells them that if they really want to win, all they need to do is get the Ghoststone, which Chuck eats.
Fastener kicks Chuck repeatedly in order for him to spit the stone, which Brief proceeds to catch. Panty shoots the newly created ghosts and orders Brief to run, who decides to flee through a toilet. Scanty and Panty go off on a duel, just as Stocking and Kneesocks do the same. Kneesocks calls for Fastener, who appears driving G-String. Stocking does the same in order for it to be fair, and Chuck appears driving See Through. Scanty and Panty keep fighting, while Stocking and Kneesocks drive their respective cars, which at some point, collide from the front.
Panty forces Scanty's face on a toilet, and upon freeing herself, Scanty does the same to Panty, but on an urinal. See Through manages to rip G-String in two, while Brief runs to the school rooftop. He is soon found by Kneesocks, but Stocking pushes him aside. Scanty points at Brief with her revolver and shoots at him, but Panty shoots at the same time, sending Scanty's bullet away. The demon sisters pin Brief down, and threaten to kill him, but the angels tell them they don't care for him, rendering the demons' threat useless. The Demon sisters themselves, however, are greatly shocked to hear this sort of thing from angels as they are supposed to be emissaries of God yet they care nothing for saving the life of an innocent human.
Panty tells them rules are meant to be broken, and both Scanty and Panty shoot each other. Panty's bullets seem to deflate Scanty's, and Stocking then proceeds to send the bullets the demons' way with her katana. Brief throws the stone at the angels, which Panty destroys, making both, the factory and the school burn to a crisp. The demons tell them they'll call it a draw and flee. Panty asks Brief if he wants to have sex with her, but Brief tells her he wants to take things slow. Panty then ditches him and she and Stocking leave. In the end, Scanty and Kneesocks report back to the mayor, who punishes them for their failure.
Additionally, the number of bullets fired in Scanty's last attack fluctuates between shots. Initially, four bullets survive the contact with Panty's shots, but around ten bullets are seen zeroing in on the Anarchy sisters before Stocking deflects them. In the subsequent shot of the bullets ricocheting toward the demon sisters, there's only four once again.
The fact that Panty was not afraid of Scanty and Kneesocks killing Brief might be because heavenly weapons seem to have no effect on humans (though whether demonic weapons share this feature is unknown).
Similar to the single dot and dual dot selector switch on a Glock 18, Scanty's pistols have similar switchs, with the single Demon Wing on the selector representing Semi-auto, and the Dual Demon Wings representing fully automatic.
This is the only episode to have one segment.
Kneesocks breaks the 4th wall when a V.S sign appears on the screen and she smacks it away.