In the episode, the human fleet encounters the Battlestar Pegasus, commanded by Admiral Helena Cain. She assumes command of the fleet. Gaius Baltar discovers that Pegasus crew members have been raping and torturing a Cylon prisoner. Cain sentences Helo and Chief Galen Tyrol to death after they accidentally kill a Pegasus officer who was preparing to rape Sharon. In response, Commander William Adama orders Vipers to escort Marines to Pegasus. Cain orders her own Vipers to intercept as the episode ends.
A large unknown ship appears on Galactica's DRADIS. After a tense moment, the ship is identified as the Battlestar Pegasus, a Colonial vessel previously believed destroyed in the Cylon attack on the Colonies. Cain boards Galactica with an armed escort and welcomes the crew "back to the Colonial Fleet." Cain relates to Adama and President Laura Roslin how she ordered a risky maneuver to escape the initial Cylon attack on the Twelve Colonies. Adama recognizes Cain as his superior, but Cain promises not to interfere with Galactica's internal affairs.
Cain declines to resupply the fleet's civilian ships and integrates the battlestars' crews, transferring Apollo and Starbuck to Pegasus over Commander Adama's objections. Cain's executive officer, Colonel Jack Fisk, tells Colonel Saul Tigh how Cain shot his predecessor for refusing an order. Fisk claims his story is a joke, but Tigh believes it is true and relates the story to Adama. Adama reiterates his willingness to follow Cain, to both Roslin and Tigh, and insists that Apollo and Starbuck obey their transfer orders.
Baltar visits Gina, a Number Six copy held prisoner aboard Pegasus. He and Head Six are horrified to discover that the Pegasus crew has systematically tortured and raped Gina. Baltar attempts to establish a rapport with Gina by providing food and confessing to his involvement with another Six copy on Caprica.
Helo and Tyrol rescue Sharon from imminent rape by a Pegasus interrogator but accidentally kill the interrogator in the process. Cain denies Adama's request that Helo and Tyrol be given a jury court-martial and sentences them both to death for murder and treason. Adama demands that Cain return them to Galactica and orders Vipers to escort a Marine assault team to Pegasus. Cain refuses and sends the Pegasus Vipers to intercept Galactica's.
"Pegasus" was nominated for the 2006 Hugo Award for Best Dramatic Presentation, Short Form. It received favorable critical reviews.