Episode 5 of "IT: Welcome to Derry" plunges viewers deeper into the escalating horror as Pennywise the clown makes its terrifying debut, leaving no one safe. Following Dick Hallorann's shadowy encounter and a distant sighting in earlier episodes, the full reveal of Pennywise (Bill Skarsgård) marks a critical turning point, intertwining the fates of the town's inhabitants and a desperate military operation.

The episode picks up after Hallorann's psychic delve into Taniel's (Joshua Odjick) mind, with the unconscious boy rushed to the infirmary. General Shaw (James Remar) reveals to Leroy Hanlon (Jovan Adepo) the gravity of the situation: Taniel is part of a 400-year-old secret order tasked with concealing ancient pillars. The military, now aware of a tunnel beneath the Neibolt house leading to these pillars, plans to secure the area, aiming to end the Cold War without American casualties. Hanlon, however, is furious that Shaw allowed his family to move to Derry amidst such danger.

Meanwhile, bonds are reforged in the wake of terror. Lilly (Clara Stack) visits Marge (Matilda Lawler) in the hospital, who, despite an eye injury, is alive. Marge had lied to protect Lilly, claiming her glasses caused the injury. Lilly, unsure if the entity will strike again, assures Marge she won't face it alone. At the standpipe, Lilly is shocked to find Matty (Miles Ekhardt), previously feared dead, alive but weak. He reveals the clown left him alive to feed on his fears and that he escaped because it sleeps during the day. Matty also mentions Phil (Jack Molloy Legault) was left alive but incapacitated.

Elsewhere, Chief Bowers (Peter Outerbridge) publicly escorts Hank Grogan (Stephen Rider) to a bus bound for Shawshank, amidst an angry crowd. Charlotte (Taylour Paige) witnesses a disturbing scene, including a police officer with an unsettlingly wide smile. Later, Charlotte tries to confirm Hank's paperwork, only for her husband to confront her, urgently needing her to believe him. Rose (Kimberly Guerrero) also seeks answers about Taniel, and Shaw confesses his memories of Derry resurfaced five years prior after a DOD drug, revealing the town's secrets were the key to national security. Rose warns him the entity cannot be controlled and insists Taniel must help, entrusting her nephew with a dagger-like weapon to fight it.

Fearing for his family, Leroy moves his wife and son to the military base. However, a radio report announces the Shawshank bus crash and Hank's escape. Ingrid (Madeleine Stowe), Lilly's housekeeper friend, picks up Hank, revealing she was the white woman with him during the movie theater attack. Seeking refuge, Hank turns to Ingrid, who then arranges a meeting with Charlotte on the base. The children, too, decide to take action. Lilly brings Marge to the standpipe, gathering new friends to save Phil. Despite their fears, Lilly, armed with her mom's anti-anxiety pills, coerces Matty into leading them into the sewers.

Simultaneously, the military descends upon the Neibolt house, soldiers with rifles ordered to shoot anything irrational. Hanlon, Taniel, and Halloran join the expedition into the dark, waist-deep tunnels. The oppressive environment quickly triggers Hallorann's deepest fears. He falls into deep water, surfacing in a bathtub where his grandmother warns him that "he's coming again." His grandfather appears, gun in hand, demanding Dickie open his box of fears. When Hallorann refuses, his grandfather shoots his grandmother and laughs menacingly, a familiar clown-like cackle, as a yellow light erupts from the opened box. Other soldiers face immediate threats, with two attacked and killed by a skeletal Uncle Sam. Amidst the chaos, Taniel loses his glowing dagger in the water. Hanlon and Pauly (Rudy Mancuso) encounter what appears to be a panicked Charlotte, but it's a deceptive entity. Leroy shoots it, only for the 'dead' eyes of his 'wife' to turn white, smile, and swim away.

The children's journey into the sewer is equally perilous. After taking the pills, they become disoriented. They hear screams and witness gruesome apparitions: a friend's dead body surfaces, followed by two others singing and twirling. Matty's corpse emerges from the water, and the Matty they knew transforms into Pennywise. The clown chases the screaming children, and Lilly falls behind. Hanlon and Pauly hear the screams, and Leroy runs into his son, Will (Blake Cameron James). Mistaking Will for another entity, Hanlon prepares to shoot, but Pauly, also seeing Will, heroically shields the boy, taking a bullet to the chest. With his dying breath, Pauly tells a remorseful Leroy to "make it count." Leroy, clutching Pauly's body, urges the children to flee.

Lilly, lost at a dead end, cries out, but only Pennywise hears her. He taunts her about Matty, transforms into her mangled father, then back into his clown form, charging at her. Just as he's about to strike, Pennywise is halted, mouth agape, unable to move. The glowing dagger, lost by Taniel, lies shining brightly in the water beside Lilly. Pennywise retreats, and Lilly retrieves the weapon. Back on base, Hanlon reports Pauly's death, receiving Shaw's condolences. Shaw threatens retribution against the Indigenous residents for their perceived role in the chaos, but Hanlon's only concern is his family. Leroy inquiries about Hallorann, learning he hasn't returned, though Shaw believes Hallorann is resilient enough to make it back. The episode concludes with Hallorann emerging from the sewer, disoriented. He encounters another soldier, who turns out to be Pauly, his eyes now white. The final shot reveals Hallorann's box of fears, wide open, ready to unleash its contents.