As the Knights activities make the evening news, a strange man named Nazumi wanders the city with machines strapped to his body. People on the WIRED are asking: ""Who is Lain"". Meanwhile, the two MIB agents take Lain to the Techibana offices where Lain's identity is challenged by a man; how well does she know her parents, her sister, herself? Can Lain answer him?

Still shaken by the information she received from the Men In Black, Lain discovers that she is being blamed for spreading an ugly rumor in the WIRED. Is what the MIB said is true; is she another person in the WIRED? Or is she doing it herself? Lain must find out or risk losing the one true friend she has.

A documentary about Roswell gives Lain some valuable information about the pioneers of the WIRED. Later, at the Cyberia, J.J. tells Lain that she left something the day before and hands her an envelop with the Knight's logo on it. The envelop contains a chip. Believing this was the other 'Lain's' doing again, she decides to call Taro's bluff and go on a 'date'. Taking him to her room, Lain demands that he tell her what he knows. Together, with Taro's information and the mysterious chip, Lain finds out more then she expected.

Lain struggles with her identity. Is she a human being, or just a hologram? And are the Knights responsible for the Evil Lain? Lain decides to deal with the Knights once and for all.

Alone and frightened, Lain immerses herself in the WIRED, processing the events of the past few weeks and searching for the truth of who she is.

Troubled by what she saw, Alice decides to visit Lain at home and find out what is going on. Meanwhile, the two MIB agents receive a terrible shock and Eiri reveals his real motive for removing the barrier between the real world and the WIRED.

The world is crumbling, people are dying and Alice's sanity is threatened. To save humanity, there is only one thing Lain can do; she must make the ultimate personal sacrifice.