This is the best Romulan episode of The Next Generation. Where the earlier third season effort "The Enemy" seemed to go out of its way to avoid real comparisons to the classic original series episode "Balance of Terror," "The Defector" tells its own story, which is very much of a common Next Generation theme, and emerges as a new classic.
There are many episodes that successfully mine some of the same territory, whether "Chain of Command, Part II" from Next Generation or "Duet" and "Defiant" from Deep Space Nine, but none diminish the impact of "The Defector." The title character, naturally, is a Romulan, who stumbles onto some plans and rushes to Starfleet in order to prevent a costly war. At first he pretends to be a minor figure, believing that he'll have a better chance at being believed, but the truth is eventually revealed, his bad reputation known, and his credibility once again tossed around by Picard and his crew. The whole episode is about these characters mulling over the situation, an even more pure version of the stalemate from "Balance of Terror," this time set entirely aboard the Enterprise. There's no place to hide. This is Next Generation diplomacy at its finest.
James Sloyan makes the first of many Star Trek guest appearances as the Romulan in question, which is just one of many further elements to relish about the episode. There's also one of the series' classic teasers to kick things off, Data performing Shakespeare's Henry V on the Holodeck (with Patrick Stewart nearly unrecognizable in support, allowing him to flex his considerable acting muscles), and a return from Andreas Katsulas's character from "The Enemy" (thereby completing the redemption of that episode).
When you think of the dramatic rise in quality of the series in its third season, "The Defector" is at least as responsible as any other episode that may spring to mind, and yet I think it can be easy to overlook. It's a Romulan episode, and Romulans aren't new in Star Trek, certainly by this point in the franchise. Sometimes it can be easy to assume that you need fresh aliens to remain relevant, but "The Defector" is also a reminder that established continuity can provide for relevant and engaging material, which is a concept DS9 ran with for seven seasons. Could this story have been told with aliens we'd never seen before? Sure, but it probably wouldn't have been as memorable.
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Memory Alpha summary.