Elmo imagines 123 Sesame Street, his own habitat. He also imagines Big Bird in his habitat (his nest) and Oscar in his (a trash can). Smartie's habitat is also Sesame Street and shows Elmo video of various types of habitats. Elmo and the kids identify which animal belongs in which habitat. Mr. Noodle's brother, Mr. Noodle, stuck in a cold climate, must figure out what animal also shares that habitat. He imitates an elephant and chicken before finally dressing as a penguin. He's rewarded with a fish.
