Each kingdom has their own particular “special forces” group that handles espionage, wet works, etc for the kingdom. These organizations exist because, despite the Chunin Exams Vytal Festival, each kingdom wants to jockey for being the best while avoiding actual war. Atlas has their Specialists in this role, for instance. The person in charge of Mistral's equivalent is Cinder Fall, and as part of Atlas-Mistral cold war efforts, she's been covertly funding, etc the White Fang against Atlas and the SDC. No one really knows if Vacuo has their own version – they might only do counter-intel, maybe they don't exist, or maybe they're so good no one can find evidence of their work.
Ozpin's actions starting part way through his time as headmaster have at times been barely on the line of legality, and there are suspicions of quite illegal actions taken on his orders (but nothing that has ever been proven). His best intel and wet works specialist is Qrow. Most, if not all, of the staff are loyal to Ozpin rather than Vale, and a number of Huntmen families are loyal to him as well, with their children attending Beacon to continue service. Nothing's been done to try to remove him, primarily due to his power base and his entrenched position at Beacon. Right until he started working to get his hands on a Maiden.
Cinder attempted to take action to prevent one from falling into Ozpin's hands, but Qrow was identified in the area. Instead of killing the Maiden, Cinder put a bit of a tracer aura technique into the Maiden alongside the aura poison and retreated when Qrow intervened to “rescue” the Maiden. Her actions kept Qrow from identifying her or the rest of her team, but left a Maiden in Ozpin's hands.
Winter Schnee and Cinder meet in secret to discuss the situation, and decide that overt action isn't possible currently. Realizing that their best chance at dealing with this threat is to work together, they pick their best agent that isn't known to the enemy. Enter Specialist Nora Valkyrie and Agent Emerald Sustrai. The plan is to apply to Beacon as students, gain the trust of Yang Xiao-Long – niece to Qrow –, and uncover the plans of Ozpin so Mistral and Atlas can take overt action to take down Ozpin's organization.
Unfortunately, the plan doesn't even start before things start going wrong. The White Fang – tired of being Mistral's catspaw against Atlas and not receiving enough support to actually be able to make a difference – decide to start going on their own and paying Mistral back for their lack of effort. The first step is to swap out Emerald's application for that of White Fang operative Blake Belladonna. As a result, Emerald doesn't make it to Initiation and Cinder is forced to work on an alternate plan to get her into Beacon.
Nora becomes concerned when she sees that Pyrrha Nikos is attending Beacon rather than Haven like everyone expected. This concern grows during the first semester as she learns about Ozpin being the one to convince Pyrrha to attend Beacon – supposedly to get away from fans and media by being in a kingdom with stricter laws on such things – and that he even covered travel expenses to get her to the school. Cinder and Winter believe Ozpin may be grooming her to become the next Maiden, loyal to him from the start.
And that's not the only concerning thing in that intake of students. There's Ruby Rose, a 15 year old skipped forward two years to attend Beacon, whose only things of note are that she has silver eyes and is a scythe user... like Qrow.
Furthermore, there's SDC heiress Weiss Schnee attending, much to Winter's surprise. Her ending up on a team with Ruby and Yang just increases worries that it's part of a move by the SDC to align with Ozpin.
To top things off, you have Jaune Arc. The members of Team CRDL are all members of loyalist families, so their presence isn't unexpected. Lie Ren goes where Nora goes, which just helps cement her cover story since there's no way lifelong friends and fellow orphans would simply not go to the same academy. But Jaune Arc, member of the prestigious Arc family, trying to attend Beacon using forged documents? There has to be something fishy there. Furthermore, he ended up randomly selected to be a “decoy” (think like the movie The Man With One Red Shoe) for the two actual agents being inserted.
As a result, we have three plot threads going on. There's Nora's work trying to ferret out Ozpin's plans. Blake's efforts to stay undercover and uncover whatever Mistral is up to so she can swing things to the White Fang. And Ozpin's efforts to eliminate the spy that came up with a horrible cover story by death or forcing them to break cover (thereby giving Ozpin grounds to throw them out).
So Nora and Ren tend to foil attempts on Jaune, but the results keep getting attributed to Jaune, causing Ozpin's people to keep overestimating his abilities. This leads to the Jaundice arc, where Ozpin has CRDL go bully him in order to force him to break cover. Eventually Jaune reveals to Pyrrha that he faked his transcripts. Cardin, aware of the “cover story,” uses the opportunity to up his game with the “blackmail.” The events at Forever Fall lead Ozpin and Cardin to think that Jaune is a genius at maintaining cover (having missed spotting Pyrrha's aid at the end of the Ursa fight), particularly how he accepted training from Pyrrha afterward, thereby allowing him to hold back less while pretending it's a result of the training. The team meeting prior to his acceptance – covering the truth of how he got in, and the other noting all the attempts on Jaune that they'll foiled on the sly – is unnoticed, but results in Pyrrha's loyalty to Jaune and JNPR finally coming ahead of Ozpin.
Blake enters Beacon as an undercover White Fang operative. Her mission is to covertly learn why Atlas and Mistral are sending people to Beacon, and if possible acquire whatever the target is for the White Fang to use as a bargaining chip to renegotiate their support from Mistral. Discovering that the White Fang are working with the Vale underground in order to turn themselves into a global power, she decides to abandon the mission and work to stop the White Fang's plans.
For the most part, Nora's story threads through the other two in the background as she works to gain the trust of Ruby and/or Yang while also investigating for where the Maiden could have been hidden (and what Ozpin is planning). She disguises her investigations around Beacon as hunting for sloths with Ren. Her efforts to redirect Pyrrha's loyalty to Jaune work well when combined with Pyrrha's existing appreciation for his lack of knowledge of her accomplishments. Becoming friends with Ruby and Yang lead her to discover that they seem completely unaware of what their uncle is up to with Ozpin.
The arrival of students from the other schools gets Emerald into the school finally after skulking around Vale for months. Haven's contingent is led by one of their teachers, Cinder. Mistral has the White Fang gather near Vale, while Atlas has Ironwood bring a fleet of airships. The plan – once Ozpin's plans are revealed – is for the White Fang to use the Mountain Glen rail line to breach into Vale, drawing what Huntsmen are in the area out to face them before Atlas forces assault Beacon itself to bring down Ozpin. Unfortunately, the White Fang are no longer willing to stay “under Mistral's thumb” and decide a breach with Grimm would help their cause more, and Roman Torchwick is more than willing to aid them.
Ruby's interference in the CCT hack revive concerns that she's in with Ozpin, perhaps in training to take up Qrow's role. The fact that her team blew a White Fang recruitment/gathering point while destroying an Atlas Paladin mech doesn't improve views of her team's loyalties any either.
Things come to a head during the Vytal Festival, when Pyrrha learns of the plans to move the Maiden's power into her and, trusting in her team, tells them. Nora decides to reveal her real job and gives Pyrrha more context on events leading to this point. Ruby overhears part of it and runs off to confront her uncle about things. Nora notifies Emerald and Cinder of what happened as she tries to pursue, and Emerald uses her Semblance to keep Qrow from noticing that the cameras in the room Ruby confronted him in are transmitting. As a result, Ozpin's plans are televised live across Remnant, along with Ruby's declaration to stop them.
Atlas's Specialists and military forces begin deploying into Beacon while Cinder infiltrates to where Pyrrha said the Maiden was located. Fighting breaks out between loyalists and everyone else, with Pyrrha and RWBY siding against Ozpin. In the end, Ozpin's fate is presumed dead as he was trying to escape with the comatose Maiden, and his conspirators appear mostly dead or captured.
In the Infirmary, Jaune and Pyrrha are getting patched up while Nora and Ren chat with them, when the Arc family shows up. His parents reveal that there is a test all Arcs must pass before the family can begin training them, which the test being to use your wits and intelligence to find yourself training to be a Huntsman in the face of seeming lack of support from the family. As such, Jaune has passed the test and, given that Beacon is probably not reopening any time soon, can begin family training. He balks at abandoning his team, and so the training offer is extended to the rest of JNPR (“She's good. We can make her better.”). Nora and Ren decline – citing Nora's work – but indicate that if things wrap up early enough, they could drop in later.
Meanwhile, back in RWBY's dorm room, the four are packing their stuff. Ruby stops, wondering why she's bothering, as she's not going to return home. Yang's surprised. Ruby comments on how it turned out her uncle was a bad guy and she doesn't want to find out the same about her dad by being home when they come to arrest him, or arriving home to find out he's fled. Yang sighs and wraps an arm around Ruby, telling her that they'll figure out something because she's not leaving her sister. Blake comments that they're not alone, because her only home has been the White Fang and she pretty violently cut ties with them over the last year. Weiss comments that her sister found her a place to stay while Atlas thoroughly investigates their father and the SDC to links with Ozpin, and perhaps she could see if there was room for the rest of her team? Yang comments that she spent much of her life trying to find her mother, and with all the revelations of the year, perhaps she should stop trying to piece family back together based on blood, but accept the family she has now – looking at Weiss and Blake while giving Ruby a squeeze – and look to the future. Seeing their smiles, Weiss sends a message to her sister before the four return to packing.
Ironwood, Winter, and Cinder are in Ozpin's office discussing issues. Topics include what the fallout from the operation is going to be, how – despite the setbacks caused by the White Fang going completely off the reservation – the two countries' agents worked well together, and that it's too bad that things were over. Winter pauses briefly to answer a message on her scroll. Jaune's mom (to the surprise of the others in the room, who didn't see her enter) comments that the cooperation between the countries isn't over yet, pulling up from Ozpin's files an ongoing operation folder that includes files labeled “Salem” and “White Devil.”