The railway is preparing for Sodor Day and Thomas and James are racing to the wharf to be given a special job by Mr. Percival. Thomas wins, and is sent into the hills to collect lumber with Duncan. After Thomas teases Duncan, Duncan pays Thomas out by sending him on an old, disused line which he claims will lead Thomas back to the wharf faster. After avoiding an old, collapsing bridge, Thomas takes another route at the old junction, and as he journeys farther down the line, he comes across an old overgrown town.The news of Thomas' discovery spreads, and eventually reaches the Fat Controller, who tells Thomas that the town is Great Waterton - the largest town on Sodor when steam engines first came to the island. The Fat Controller decides that the restoration of the legendary lost town would be perfect for Sodor Day, and calls the Pack to help. Thomas is told to take charge of the engines working around the town, while a new tank engine named Stanley is brought to do Thomas' regular jobs.All of the engines take to Stanley, who does a good job and has fun as well, but when Thomas sees Stanley doing his jobs and fraternising with his friends, he becomes jealous. Thomas is furious when Stanley takes his place at Tidmouth Sheds, and the final straw comes when Stanley takes his place as the leader of the restoration project after Thomas has an accident.Later, Thomas is shunting stone trucks for Stanley to take away when he decides to make Stanley look foolish by giving him a train too heavy for him to pull, but the plan backfires - as Stanley ascends the hill, a coupling breaks and the trucks race down the hill, veering into a siding and crashing into the newly-finished standpipe. The Fat Controller states that this will likely set back the restoration past Sodor Day, and Thomas is blamed. Stanley, however, realises that Thomas merely missed his friends, and wants to set things right.That night, Thomas decides to clear the rubble out of the way. He is almost finished when he accidentally bumps a truck into an old mine shaft. Racing in after it, Thomas crashes onto a wooden platform and floats down an underground waterway. The engines soon realise that Thomas is missing, and the Fat Controller organizes a search effort. Meanwhile, Thomas continues floating until he reaches an opening to the mine, and is flung across a canyon and down a hill.Stanley decides to make another search effort by himself before he returns to work. Thomas, with the last of his steam, sounds a loud, long whistle. Stanley hears it and hurries to where Thomas is stranded beside the track. The two make up for their quarrel and Stanley pulls Thomas back onto the rails, but the strain is too much for Stanley and a valve bursts. Thomas, using some of Stanley's coal, pushes him back to Great Waterton. The word soon spreads that Thomas has been found.The standpipe is rebuilt, completing the restoration. As a sign of friendship, Thomas offers Stanley his last job - bringing the mayor to the festivities at Great Waterton. The engines gather at the town for the celebration, and Thomas realizes just how important his friends are.