Professor Rotwood tries to steal the trophy for the winner of the talent competition, claiming that it contains an imprisoned ancient evil djinn. However, he is caught by the police. Trying to run away, Rotwood grabs the wrong trophy and goes downstairs. He fills the trophy with water and tries to convince the police that there is an ancient evil djinn, but since he has the wrong trophy, nothing happens.
The next day, everyone figures out that someone tried to steal the trophy, so now Jake must try to get the trophy before Professor Rotwood does. However, since the principal has the trophy hidden, Jake has to enter the talent show. Now he is forced to go against his friend Spud, and he doesn't want to, but his Grandpa tells him that he has to. But when Professor Rotwood enters a student in the talent show, Jake has more problems.
In the talent show, Spud and Jake are the only ones left. Spud goes first and "unleashes" the ancient evil djinn from his hat. Jake has to transform into the American Dragon and fight the djinn, but Spud says the magic words and makes the djinn disappear and become imprisoned again. Fu Dog says that they have finally found the magic words. Jake drops out of the competition and Spud wins.
Outside, Spud and Jake apologize to each other, and Spud gives the trophy to Jake. In Grandpa's shop, they tell Grandpa what happened, but Jake and Spud have lost the trophy.