Peter is dead and buried beneath the floorboards in the Hale House. His death however, results in his spirit manifesting as hallucinations in Lydia's mind, resulting from his biting her and implanting memories of himself within her.
At Beacon Hills Hospital, Lydia is in the shower, recovering from her attack by Peter. Peter's spirit is starting awaken in her, she starts hallucinating that the bath water is turning black, being filled with hair to her confusion and terror.
He starts to appear to Lydia Martin in visions, beginning the day Erica Reyes returns to school as a newly turned werewolf. Jackson had been yelling at Lydia about making him immune to the bite, and she retreated to the bathroom to cry. While in the stall, she sees a man's bare feet below the door. She follows the figure down the hall to a trophy case. She sees that one of the trophies has Peter's name on it and remembers him from the night of her attack.
Later that day, Lydia, Scott, Stiles, and Allison are at the skating rink. Lydia follows a trail of wolfsbane petals to a plant growing out of the ice. She sees Peter's face below the ice and starts screaming.
Peter then starts to appear to Lydia as Young Peter Hale, a hallucination of Peter's younger self. He talks to Lydia as she sits outside the guidance counselor's office.
Peter next appears to Lydia during Economics class. She's watching a student do a problem on the board, and suddenly the student is Peter and the writing on the board is a revenge spiral. Peter turns to face her. He throws desks across the room as he comes at her, and she jumps up with a cry and backs against the wall. Peter walks up to her, crushing something in his hand, and then blows a white powder in her face.
Lydia comes out of her vision crying, with Coach Finstock calling her name. She's up at the front of the room, and she's written ɘmqlɘʜɘnoɘmoƨ (Someone Help Me) all over the board. Young Peter is sitting in the class just a few desks away from Stiles.
Later that day, Lydia sees Peter's burned face in a Rorschach test in the guidance counselor's office.
That evening, Young Peter visits Lydia at her house. Lydia asks him if there's a non-rapist explanation for him being in her yard in the middle of the night. He tells her that he heard Prada barking and that he lives in the house out back. She thanks him for bringing Prada back and he asks her if everything is okay. She wants to know what damage he's implying and asks if he's referencing the other day in class. He shrugs like yes. She claims that she's not crazy. "At least I'm not one of those Vicodin-popping wrist-cutters at school." He asks her if that's what the other girls are like and steps closer. She backs up. He asks her why she moved away. "You stepped forward." "Maybe I wanted to kiss you." "Maybe I don't want you to." "Does that mean maybe I could?" She threatens him, so he asks if he can hold her hand. She scoffs at him, so he picks a flower off the trellis behind her and asks if he can give her a flower. He makes her promise to keep it. She tells him that if she doesn't have it tomorrow, she'll lie.
A few days later, Young Peter asks Lydia to meet him after school and bring the flower he gave her. She goes home but can't find the flower. When she looks by the pool, where he picked the flower the first time, she can't find any there either. Lydia looks out the back gate and starts walking into the woods. She comes upon a giant house and goes inside.
Lydia walks around the empty house calling for people. Young Peter walks up behind her. She asks if this is his house, and he says that it was. However, the exterior of the house previously shown does not match the Hale House. He asks her if she brought the flower. She says she couldn't find it. He tells her that it's okay, but since she doesn't have it he wants to collect his kiss. They start making out.
When Lydia pulls away, she sees their reflection in a mirrored wardrobe in the middle of the room. She's holding Peter's burned body, and suddenly the background changes to the interior of the Hale House. She backs away from him in fear, and he asks if something is wrong. Lydia screams, and we see the actual exterior of the Hale House.
Peter sits down next to Lydia. He apologizes for how confusing everything must be. He thinks she'll pull through this ordeal with a minimal amount of PTSD and a few years of profoundly disturbing nightmares. He tells her that he had a plan and starts playing with her hair. "It was a good plan. But if there's one thing I've learned in life it's to always have a back-up." Her immunity means that she wouldn't turn and she wouldn't die, but she'd be able to do a very important thing. He nuzzles her hair and then disappears before he tells her what.
Lydia has flashbacks to all the times she saw Young Peter and realizes that he wasn't there. She opens her hands and finds a wolfsbane flower.
The camera pans down to reveal Peter buried under the floorboards of the house.
The following week, Lydia starts having a vision while she's in the shower. She's in the middle of the field in her winter formal dress, and everyone is cheering for her. Then she turns and sees Peter Hale stalking out of the dark. She tries to run, but he grabs her, throws, her to the ground, and crawls on top of her.
She wakes up from her nightmare with a shout. Her sheets are covered with dirt that she's carried in from a night of acting without her knowledge. "Leave me alone," she says. Peter is in bed next to her and he sighs a little, telling her that he can't, not yet. She asks if he's real, and he tells her that the answer is also "not yet." He says that everything will get back to normal once she does everything that he asks.
Peter leads her down the stairs and explains to her that everything needs to happen on the next full moon. He explains that the full moon of March is called the Worm Moon because it's the last full moon of winter and the worms start to crawl out of the earth.
Lydia points out that the full moon is on Wednesday, which is also her birthday. Peter says that her birthday is always the party of the year. He tells her that they're going to make it a very special party. She asks what will happen if she doesn't go along and he shows her a vision of her party guests murdered. "Why me?" "Because Lydia Martin is not only beautiful, not only incredibly intelligent, she's immune." She asks what it is that she's immune to, and Peter realizes that no one has told her about werewolves yet. He says that it's probably best if he just shows her, and then he appears in his alpha form outside her living room window. Lydia screams, and Peter breaks through the window to leap at her.
Under Peter's control, Lydia throws her party and laces the punch with wolfsbane. She then seeks out Derek in the subway tunnel hideout, knocks him out with some purple powder, and somehow drags him to the Hale House. He's starting to come to as she drags him across the floor. She has turn up the floorboards over where Peter is buried. Derek begs her to stop. She puts his arm in Peter's hand. She then adjusts some mirrors she has setup around the room and bounces moonlight directly down onto Peter.
Peter's claws dig into Derek's arm and his blood brings Peter back to life. Peter bursts from the ground, and Derek tries to get away. "I heard there was a party. Don't worry, I invited myself," Peter says.
Peter's resurrection comes at the price of his physical power. While he's still a werewolf, he's weak and doesn't heal as quickly as he should. By the time Derek wakes up, Peter is gone. Later that night, Peter watches as Matt and the kanima take hostages in the sheriff station. He sees Gerard Argent kill Matt and take control of the kanima.
The next week, Peter finds Derek in the Hale House. Boyd and Erica have just declared their desire to leave Derek's pack. Derek turns away to glower, then picks up a shard of broken mirror and throws it like a knife. Peter catches it just as it's about to cut his throat. "I expected a slightly warmer welcome," he says.
Peter is impressed with how screwed up things have gotten in the few weeks that he's been dead. Now there are lizard people and geriatric psychopaths. "And you're cooking up werewolves out of every self-esteem deprived adolescent in town." Derek asks Peter what he wants, and Peter just claims he wants to help his favorite nephew. He asks Derek if they can just talk and puts his hand on Derek's shoulder. Derek throws him across the room into the staircase.
Derek continues to toss Peter around the house and beat him up. Peter kind of laughs and assures him that he doesn't want to be the alpha again considering that his last attempt at it ended in his death. Derek grabs him to punch him again, and Peter tells him to bring it on, to get out all the anger and self-loathing that comes with total and complete failure. "I may be the one taking the beating, Derek, but you've already been beaten. So go ahead. Hit me if it will make you feel better." Derek stops hitting him and shoves him away.
Peter examines his wounds in the mirror shard and complains that he's not healing as fast. "Coming back from the dead isn't easy, you know." He says that he needs the strength of a pack to help him, which means that Derek needs him as much as he needs Derek. "Why would I want help from a total psycho?" Peter claims that he's not a total psycho and Derek did slash his throat open so they're both works in progress.
Peter gives Derek a rundown of his failures. Derek glares at him. "How about you tell me something I don't know." Peter promises to tell him how to stop Jackson. Specifically, how to save him.
Peter explains that there's a myth that you can cure a werewolf by calling out its Christian name. This is stupid of course, but sometimes myths bear a hint of truth. "Our names are a symbol of who we are. The kanima has no identity. That's why it doesn't seek a pack." Orphans also grow up with no pack or identity. Peter says that they need to bring Jackson's identity back to him. "How?" "Through his heart! How else?" Derek says that Jackson doesn't have too much of a heart to begin with, but Peter doesn't believe that. He says there's one person that Jackson shared a real bond with, who can reach him: Lydia.
Peter tells Derek that he relies too much on anger and needs more heart, which is why he's always known that he needs Scott. Peter argues that even someone as dead on the inside as himself knows better than to underestimate the simple power of human love.
Derek and Peter find Scott and Isaac at the school not long after Stiles was kidnapped by Gerard. Scott frowns at Derek. "What the hell is this?" Derek replies that he thought the same thing when he saw Scott talking to Gerard at the sheriff station. Scott defends himself by saying that Gerard was going to hurt his mom and he had to get close to Gerard. Peter agrees with Scott. "Have you seen his mom? She's gorgeous." "Shut up," Derek and Scott both say. Isaac asks who Peter is and Scott explains that Peter tried to kill them all so they set him on fire and Derek slashed his throat. "Good to know," Isaac whispers. Derek explains that Peter can help them save Jackson, but Isaac replies that Jackson is dead. Scott tells them it just happened on the lacrosse field. Everyone looks concerned and Peter says that if Jackson is dead it's because Gerard wanted him to be, so they need to figure out what his plan is very quickly.
Scott, Isaac, Derek, and Peter go to the Hale House. Scott announces that the Sheriff found Stiles, though no one seems to care. Derek protests that he looked everywhere, but Peter goes straight for a loose board in the main staircase. "You didn't look here." He pulls out on a briefcase covered in dust. "What is that, a book?" Derek asks. Peter gives him a scathing look. "No. It's a laptop, what century are you living in?" Peter has stored all the Hales' files on the laptop, an equivalent source of information to the Argents' bestiary.
Derek reports to Peter that Jackson is encased in a cocoon of the venom from his claws. "That sounds sufficiently terrifying," Peter replies. Peter finds information on the kanima and shows Derek that not only is Jackson just in the beta shape now, he's turning into something bigger and badder. Derek is incredulous. "That has wings." Derek tells Scott to bring Jackson to them, but Scott says they don't have time for that. Peter finds an animation of the new form and plays it. Both he and Derek jump back in terror, and Peter slams the laptop closed. They decide to meet halfway.
Even though they have to go meet Scott and Isaac, Peter is quick to point out to Derek that they don't actually know what's going on. He's sure Gerard has a plan, and he's just as sure that they don't know what it is.
Derek gallops up the street toward them on all fours and does a forward flip, landing in a crouch with his red eyes glowing. Peter, from afar, rolls his eyes. "Someone certainly enjoys making an entrance," he says, loud enough for the werewolves in the area to hear.
They take Jackson inside a warehouse and Scott asks where Peter and Lydia are. Peter is lurking behind an iron beam and spends most of the fight hiding as he is still weak from coming back from the dead.
Thanks to intervention by Lydia, Jackson shifts back from his kanima form and regains his sense of identity. Derek is recovering from being paralyzed by the kanima and sees Peter making his move while Jackson is distracted. Derek's eyes go red and joins him. They both stab Jackson with their claws from either side. Lydia rushes forward and catches Jackson in her arms as he falls. Jackson rises back up as a werewolf.
With the kanima taken care of, Derek, Isaac, and Peter wander up to the Hale House and Peter announces that Derek hasn't told Isaac everything. Isaac asks what the symbol on the door of the house means and Derek tells him that it means the alpha pack is coming. Peter clarifies that they're not coming, they're already here.