The town of Townsend, Wisconsin is evacuated due to an alleged toxic spill. Mulder speaks with Deep Throat, who suggests that the government is actually covering up the crash of a UFO. Mulder ventures out on his own and enters a government quarantine zone in Townsend, witnessing armed government forces cleaning up the remains of a craft. Mulder is detained by Colonel Calvin Henderson, who reiterates the story about a toxic spill. While in detention, Mulder meets Max Fenig, a member of a UFO investigation group. The next morning, Scully arrives and informs Mulder that his actions have resulted in an inquiry from Section Chief McGrath, who wants to terminate Mulder and shut down the X-Files. She tells Mulder that the official, classified story about Townsend is that a Libyan fighter jet with a nuclear device was shot down, and that the military are searching for the pilot; Mulder is disbelieving.
The agents return to Mulder's hotel room to find Max Fenig searching it. Fenig reveals that he has been following Mulder's career and research on the X-Files. He plays the agents a recording of a police radio broadcast from the night of the UFO crash, which captures the apparent death of a Deputy Wright and several firemen at the hands of an unknown entity. The agents visit Wright's wife, who refuses to tell them anything, saying that the government is holding her husband's body and has threatened her not to speak about his death. Back at the quarantine zone, the military pick up a figure moving around in the dark; they attempt to find and terminate it, but are attacked by the invisible figure, which emits a blinding light. The agents then visit the local ER doctor, who tells them that Wright and the fire crew were brought to the hospital dead and covered in burns, and that their bodies were seized by the military. As Mulder and Scully leave the hospital, several soldiers are brought in, covered in burns from the entity's attack. Mulder attempts to convince Colonel Henderson that his attempts to catch the being are causing it to attack in defense; Henderson has Mulder removed from the hospital.
Mulder returns to Fenig's trailer to find him having an epileptic seizure. Mulder assists Fenig and notices a scar behind his ear. He searches the X-Files and finds two alien abductees who showed similar scars. Scully notes that Max was taking anti-psychotic drugs and suggests that he is schizophrenic; Mulder counters that Fenig does not believe himself to be an abductee, but that his epilepsy could be a side effect of abduction, adding that Fenig could have been drawn to Townsend by the craft that crashed. Mulder and Scully return to Fenig's trailer and find him gone, but they overhear a police radio call regarding a trespasser at the waterfront. The agents drive to the waterfront and find two soldiers burned to death. Mulder finds Fenig hiding in a warehouse, bleeding from the ear and in pain. Colonel Henderson's team arrive and observe the presence of an additional person besides Mulder and Fenig in the warehouse. Mulder is thrown away from Fenig by a blinding light; he recovers in time to see Fenig suspended in the air before vanishing. Colonel Henderson is unable to find the invisible entity and orders Mulder arrested.
Back in Washington, Scully and Mulder are interviewed by McGrath at Mulder's conduct hearing. Mulder defends his actions as an attempt to uncover the Truth, decrying the government cover story about a toxic spill and stating that he will eventually uncover and reveal the Truth. McGrath attempts to have Mulder terminated and the X-Files closed, but is prevented by a higher authority: Deep Throat. McGrath questions his actions, and Deep Throat replies that keeping Mulder in the FBI will be "safer" than if he were to reveal what he knows "to the wrong people."
"Fallen Angel" is an important episode for several reasons. We begin to get an idea for the depth of the government conspiracy, capable of formulating both a public cover story and a secondary cover story for those within the government. For the first time, we see an alien in action, moving invisibly and attacking with bursts of heat. Deep Throat is revealed to have connections to the FBI, even having the power to dictate their decisions, increasing his mystique and making his true agenda even grayer: he has saved Mulder's career, but his reasons remain inscrutable. The influence of Deep Throat also solves a narrative issue for the series: his protection provides a justification for Mulder and Scully to continually break FBI protocol with minimal consequences.
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