Derek recruits abused teen into his pack. Because of the connection between the Kanima and his master, Jackson discovers he now fears water. Derek realizes that the creature is a Kanima. Just then, Jackson is found bleeding and unresponsive; he has stabbed himself with his own claws. Scott discovers Boyd is now a werewolf and is forced into a fight with Derek, Erica, and Isaac. Lydia discovers that the Michael Fjordbak she hallucinated about does not exist and is actually a younger Peter Hale. At the jail, Isaac transforms and breaks out, advancing on Stiles.
They had thrown Matt in the pool and left him to drown despite him yelling that he can't swim. The Kanima does not attack Gerard, instead seeming to communicate with him, which confuses Chris. Also appearing during the season are , Adam Fristoe , , , , and. Allison tearfully breaks up with Scott, but he assures her he'll wait. Meanwhile, Boyd and Erica try to flee from Derek for their own safety, but are captured and tortured by hunters. Derek discovers the unknown creature who killed Isaac's father is a Kanima, a lizard-like shape shifter created by a mutation in. They discover the creature cannot swim, so they stay in the water until Scott saves them.
To save Scott from danger after Victoria Argent learns Scott and Allison are still together, Derek ends up biting Victoria, who commits suicide before she turns into a werewolf. Allison ruthlessly shoots Boyd with arrows until the werewolves are saved by Chris, who is upset by Allison's actions. While Erica and Boyd are leaving Beacon Hills, they encounter a pack of menacing Alphas. On the field, Stiles begins a massive winning streak, and their team wins. Derek falls into the pool and Stiles jumps in to save him.
Gerard reveals he knows Scott's secret and blackmails him. He evolves in to a new werewolf, as the Kanima is now dead. At Lydia's birthday party, Lydia spikes the punchbowl with wolfsbane petals, causing all the party attendees to hallucinate the things they fear most. Stiles and Sheriff Stilinski realize there is a pattern in the murders: all victims had been in the class of 2006. Derek forces Scott to watch Gerard kill an innocent werewolf and declare that they will eliminate all werewolves to avenge his daughter Kate's death. Chris, realizing that Gerard is the true enemy, sets Boyd and Erica free, and helps Scott and Isaac take Jackson's body to Derek. Gerard drowns Matt in the lake and becomes the Kanima's new master.
Gerard persuades Allison to exact revenge on Derek for bringing her mother to suicide. Jackson, who had set up a video camera overnight to record his transformation, is upset to learn that nothing happened. After the Kanima paralyzes Danny and 6 others at a gay club, Jackson passes out, so Stiles locks him up in a police van. Daniel Sharman has been cast as Isaac Lahey, a troubled teen and member of the lacrosse team who is the first to join Derek's pack. Although dead, Peter is able to use her to lure Derek to him at the old Hale house in order to become resurrected. Scott is attacked by Victoria, who attempts to kill him.
Meanwhile, Jackson is hospitalized whilst developing a new stage of the Kanima, whereby he ends up in the hands of his former friends. Scott, Allison, Stiles and Jackson try to protect her together. Blaming Derek for his daughter's death, Gerard manipulates Allison's grief over her dead mother, making Allison become a ruthless hunter. Jackson is killed by Peter and Derek but comes back to life as a blue-eyed werewolf. At the championship lacrosse game, Gerard threatens to murder someone with the Kanima if Scott does not bring Derek to him by the game's end. Melissa finally sees Scott as a werewolf.
Matt reveals to Scott his reason for the murders: in 2006, all the victims were at a party at Isaac's house, where Matt had come to meet Isaac. Stiles's father loses his job because Stiles's irresponsible behavior reflects badly on the county. Isaac is then taken into custody for his father's murder. Isaac, a tormented teen abused by his father, is attacked while working in his father's cemetery; Derek appears to save him. Lydia's hallucinations center on a mysterious young boy at the school. Feeling guilty over her grandfather and his influence over her, Allison breaks up with Scott but she promises to come back. Held hostage by Matt at a local police station, Scott, Stiles, their parents, and Derek are able to escape, although Scott transforms for the first time in front of his mother, , leaving her horrified.
Sheriff Stilinski makes a grim discovery: Stiles has gone missing. To keep close watch over Allison, Gerard replaces the Beacon Hills High principal and Allison's mother becomes a substitute teacher. Derek, being the Alpha werewolf, is able to force him into submission. Derek recruits loner and a lonely to his pack. Deaton finds a dead hunter in his office and Chris wants him to find out what happened. Jackson is shocked when he exhibits inhuman strength.
Jackson is revealed to be the Kanima, controlled by an unknown master who can make it kill or otherwise harm on orders. The creature attacks Derek and paralyzes him. Scott discovers Isaac is now a werewolf. Gerard's body rejects the bite and he quickly disappears. Isaac discovers his abusive father was killed by a strange creature. Jackson turns into the Kanima, and a battle ensues. She attacks Derek and brings him to the Hale house, where Peter uses Derek's blood to come back to life.