Episode 3 of "Undercover High School" kicks off with an electrifying discovery: Hae-seong and Dong-min unearth a lifelike figure concealed beneath the ballet studio's floorboards, only for Hae-seong to discern, with a shock of realization, that the corpse is a chilling plastic replica. Nestled inside a pair of ballet slippers, they find a key, its presence adding an air of mystery to their already eerie find. Just as they begin to ponder its significance, Principal Park catches them red-handed. Hae-seong, quick on his feet, explains they are merely students delving into the school's ghostly legend to uncover its truth.
Later, Hae-seong briefs his team, drawing their attention to the distinctive seal on the key, an exact match to that of Seo Byeong-mun. They deduce that he orchestrated the ghost story as an intricate riddle, guiding them towards a hidden stash of gold bars. Hae-seong reveals there are four such tales lurking within the school walls, each demanding his investigation.
Elsewhere, Principal Park relates the incident to Chairwoman Seo Myeong-ju, who arrives at the same conclusion as Hae-seong, her mind racing with possibilities.
Back at school, Hae-seong tasks Dong-min with recounting the remaining ghost stories. Meanwhile, Soo-a receives an urgent call from Dong-min's grandmother, who claims her ID has been misplaced by the school — but the name she mentions sends a chill down Soo-a's spine: Jeong Hae-seong.
Dong-min unfolds the second ghost story, a tale of a grandfather clock donated by Seo Byeong-mun. According to legend, when one finds themselves alone in the school, the clock will strike, heralding the arrival of "crimson eyes" that seek out their prey. The narrative takes a eerie turn as Oh Soo-a confronts Hae-seong about the stolen ID, ordering him to report to her counseling office after school. As she retreats to her office, her eyes fall upon a pair of pink headphones in her drawer, sparking a nostalgia-tinged flashback to her first day as a teacher.
Meanwhile, at the police station, Director Kim receives a bombshell report: the statue Hae-seong retrieved is a meticulously crafted forgery. Recognizing the potential to derail Hae-seong's mission, Director Kim makes a swift decision, shredding the incriminating document to protect the operation's integrity.
Hae-seong then dashes off a text to Oh Soo-a, informing her that he had inadvertently left the stove blazing at home and could no longer make it to their counseling session. Instead, he confronts the school's security guard, accusing him of lurking at the ballet studio. The guard's resolve quickly melts away as he confesses his discovery of a hidden entrance while feeding a stray cat. Drawn in by tales of apparitions, he ventured inside and stumbled upon the skeleton, inadvertently dropping his phone within the premises. He was retrieving it when Dong-min encountered him, mistaking him for a ghost. The night before, armed with a hammer, he ventured back to mend the floorboards.
Later, Hae-seong gathers with his colleagues, realizing they've established a quaint sandwich shop near the school, serving as their clandestine base of operations and keeping them within close proximity to him. Back on campus, Soo-a catches sight of Tae-soo leading Dong-min aside. Dong-min, summoning his courage, boldly asks Tae-soo for the return of his grandmother's ID. Tae-soo complies but deliberately steps on Dong-min's hand as he tries to retrieve it. Soo-a witnesses this mischief and summons Tae-soo to the counseling office. Tae-soo dismissively tells her to mind her own business, mocking her status as a temporary teacher rather than a permanent one. As he exits, even Dong-min urges Soo-a to let it slide, dismissing it as mere horseplay.
As Hae-seong strolls down the street, he spots an elderly lady struggling to gather her belongings in the midst of traffic, with Ye-na's car honking impatiently behind her. Hae-seong swiftly steps in to lend a helping hand, the scene not escaping Ye-na's notice. He assists the old lady back to her home, which surprisingly reveals her to be Dong-min's beloved grandmother.
She beams with delight upon discovering that Hae-seong and Dong-min share a friendship, promptly offering him a small sum of money for them to enjoy together. Dong-min then unburdens himself to Hae-seong about the ID-card fiasco, expressing regret for his inability to disclose the truth to Soo-a. As Hae-seong prepares to depart, he shares his phone number with Dong-min, forging a bond of trust.
Elsewhere, Soo-a confides in her colleague Ri-an about her ordeal with Tae-soo. Cognizant of Tae-soo's father's influential position as an assemblyman, Ri-an cautions Soo-a to overlook the bullying if she wishes to retain her job, adding to her dilemma.
At a convenience store, Hae-seong gathers supplies just as Soo-a enters, leading to a minor collision as they both reach for the same beverage. In a heartfelt moment, Soo-a confesses her awareness of Tae-soo's actions and apologizes for misjudging Hae-seong. He, in turn, hands her one of the banknotes bestowed by Dong-min's grandmother, urging her to be a steadfast friend to Dong-min. Observing Hae-seong meticulously picking peas out of his meal, Soo-a's mind wanders back to a childhood acquaintance who shared this peculiar habit.
Turbulence arises when police officers descend upon Dong-min's residence, arresting his grandmother over her alleged involvement with an illegal gambling website. Dong-min frantically calls Hae-seong for assistance, prompting both him and Soo-a to rush to his aid. Hae-seong realizes that Tae-soo's machinations are behind this ordeal and urges Soo-a to intervene.
The following day, a scathing post surfaces on the school's discussion board, accusing Tae-soo of bullying Dong-min and entangling his grandmother in gambling schemes. This ignites a storm of controversy, compelling the vice principal to summon Soo-a to arrange a meeting with Tae-soo's and Dong-min's parents, along with Chairwoman Seo Myeong-ju. Ironically, it transpires that Soo-a herself authored the post.
That evening, Hae-seong attempts to unlock the school's grandfather clock using a key, only to be intercepted by Chairwoman Seo Myeong-ju. She introduces herself and makes enigmatic remarks about his inquisitiveness, extending an offer of help should he require it.
Dong-min reassures his grandmother of his determination to secure her release. Upon returning home, he finds Tae-soo loitering outside his house, adding to his turmoil. The next day, during the meeting with Myeong-ju, Dong-min dramatically reverses course, declaring the online post a fabrication and wrongfully blaming Hae-seong for the entire saga. A flashback reveals Tae-soo wielding a knife and threatening Dong-min and his grandmother, coercing him into his falsehood.
Yoo-jung and her peers catch wind of the developments, with Yoo-jung expressing concern for Hae-seong, a sentiment not lost on Ye-na. Hae-seong confronts Dong-min later, inquiring about the coercion. Dong-min admits his fears and angrily expresses his helplessness. However, Hae-seong compassionately reassures Dong-min that the blame does not lie with him.
As Hae-seong prepares to depart, he dials Young-hoon's number, instructing him to uncover every detail pertaining to Park Tae-soo. Young-hoon, complying with the request, reveals the identity of the gambling website's proprietor to whom Tae-soo entrusted his ID card.
The following day, the school's anti-bullying committee convenes for a session. Hae-seong arrives tardy, on the brink of being dismissed by the vice principal, until he dramatically makes his entrance atop his bicycle, accompanied by none other than the gambling website owner.
Back at the sandwich shop, Seok-ho and Mi-jung come to the realization that Young-hoon is silently aiding Hae-seong in his endeavors. A poignant flashback towards the conclusion of "Undercover High School" Episode 3 depicts a younger Hae-seong, then known as Si-hyun, enduring bullying due to his orphan status. Despite pressure from other parents demanding an apology, Si-hyun steadfastly refused to back down. Seok-ho, acting as his guardian, witnessed Hae-seong's plight at school and, in response, offered him the solace of studying from home.
