Lilo and Stitch are at the beach with Keoni, who is practicing for the upcoming boat race. While feeding Pudge the fish a peanut butter sandwich, Lilo spots a large purple dorsal fin luring in the waters. It rises to the surface and slices Keoni's boat in half, sinking it. After recalling what they saw to Jumba and Pleakley, Jumba identifies this incident to be the work of Experiment 602: Designed to sink ships by slicing them in half with its large dorsal fin. According to Jumba, 602 is very territorial and until he is captured any ship sailing in the bay will be sunk, including the ones participating in the boat race. Meanwhile, Gantu and 625 are already on the hunt for 602, but keep getting their boats sunk by the experiment. Jumba outfits the X-Buggy for aquatic travel. Stitch refuses to go because of his inability to float on water, but Jumba has designed some special life jackets for both him and Lilo encase any of them go overboard. Lilo and Stitch are soon out at sea, but as they prepare the capture cannon 602 sneaks up on them and sinks their buggy. Jumba and Pleakley row out to the rescue in an inflatable raft that they hijack from Gantu, which also gets sunk by 602, leaving all four of them stranded at sea.
Three minutes pass and Lilo, Stitch, Jumba, and Pleakley are still adrift at sea. 602, who Lilo has named "Sinker", has made no attack on them since he only sinks boats. So, for now they are safe. Just then, a cruise ship sails by but does not see Lilo, Stitch, Jumba and Pleakley. Stitch gets aboard and users the anchor to hoist Lilo, Jumba and Pleakley. Once aboard, Jumba and Pleakley go around the ship collecting parts to construct a device for capturing Sinker. Meanwhile, Lilo and Stitch go looking for the captain to warn him that his ship is in danger. However, Stitch causes a scene when he decides to check out the buffet. Lilo and Stitch get caught by a peppy cruise director named Tiffany, who takes them to the nursery. During nap time, Lilo and Stitch try to sneak out, leaving behind a decoy, but get caught again by Tiffany. She even catches Jumba and Pleakley hiding in a lifeboat, and has all four of them sent to the brig where they will remain until the ship drops them off at Hawaii. Little does the crew know that by going to Hawaii they will alert Sinker and he will sink the ship once it enters the bay.
Just when Lilo starts to feel hopeless, Jumba reveals that he has a plan to capture Sinker. After escaping from their cell, they return to the lifeboat Jumba and Pleakley were in an fit Stitch with a custom made diving suit, made from a blending machine, a radio, and a light bulb from one of the ship's deck lamps. Stitch jumps into the water and goes after Sinker, who turns out to be puny compared to his large dorsal fin. Meanwhile, Lilo, Jumba and Pleakley go looking for the captain, disguised as passengers to avoid getting caught again. When they find the bridge, Pleakley accidentally knocks the captain overboard. Pleakley tires to take control of the ship, but Jumba insists on steering the ship. Pretty soon, the two of them fight over the steering wheel until they break it, making it impossible to steer or stop the ship. When Stitch notices that they are in trouble, he gets back onto the ship and uses the anchor again to capture sinker, rapping him up in a ball of chains. Then he dives back into the and gets to the back of the ship to reverse the props. This causes the ship to slowdown and end up beached on the shores right in front of Keoni.
After being sunk several times, Gantu and 625 end up stranded on a tiny island, which also sinks. As for Sinker, he has found his one true place as a sushi chef in a Japanese restaurant.
- Sinker's dorsal fin is shown to have differences in size, though it is likely a continuity error.
- Moral: Never give up.
- Side Moral: Be confident in what you do.
- This episode is an obvious parody of Jaws, with Sinker referencing the titular shark antagonist.
- Pudge made a cameo in this episode, where Lilo fed him a peanut butter sandwich. He previously appeared in the original movie's opening scene when the title logo came up.
- Another callback to the first film is Stitch sitting in a chair made of sand, where in the movie's end credits, he is seen sitting in one as well.
- It is hinted that Pleakley had visited China sometime before the events of the series when he commented about his Chinese bamboo fan that Stitch was using as a prop.
- According to Lilo, Nani is revealed to have an addiction to chocolate.
- Jumba mentions about having given presents to his evil genius family back home (hinting that he may come from a family of evil geniuses), implying while he cannot go back to his home planet, he is allowed to send gifts there.
- It is unknown how Gantu and Reuben got back home after sinking on a small island.