In the puppet segment, the puppets are reading a story. As they're reading, Rexy notices that there's a balloon near him. He figures it must have traveled all throughout the neighborhood before finally reaching him. He makes up a song all about its journeys. Teddy decides to go and get something to tie the balloon down. As he does this, the balloon pulls Rexy upward and it's not long before he's floating in the air. He calls for Gilbert's help, but Gilbert can't really do anything. Teddy comes back out and tosses Rexy the string he went to get. Rexy finally makes it back to down to the ground and says he has an idea. So Gilbert and Teddy finish the story, while Rexy floats atop the now tied-down balloon and looks all throughout the neighborhood. Caillou is exploring his neighborhood too, but he's staying on the ground.

""Caillou's Horn""

Gilbert is outside chasing a butterfly. Caillou tries to catch the butterfly with his net, but misses. Sarah shows up and shows Caillou an old toy horn