The Ingalls can't make ends meet so they move to the city to find work. The Carters buy the little house and Mr. Carter runs the blacksmith shop and Mrs. Carter starts a newspaper. (John and Sarah Carter - they have two sons, Jeb and Jason.) Laura has decided she wants to spend more time with Rose so the town has hired a new teacher, Etta Plum. Almanzo's brother, Royal has come to visit and brings with him, his daughter, Jenny.
Harriet finds some old Walnut Grove bonds under a loose step when they are fixing up Mr. Hansen's old house. She says she won't cash them in but only if they do her this little favor of renaming Walnut Grove Olesenville and that little favor of letting Nels be the Mayor.
Mr. Stark has gotten himself so far in debt that he has lost his mind. He goes home and shoots his wife and daughter. Then he goes off and ends up at Laura's house. He mistakes Laura and Jenny for his wife and daughter, but when he sees Rose, he thinks that his daughter has had a baby.
A dwarf man, Lou, from the circus tries to find work in Walnut Grove after his wife dies in childbirth. He can't get a job because Harriet doesn't like the fact that he's little and from the circus and even threatens to close her bank account if the banker hires him. So, he steals food and a doll from the mercantile instead. So, Harriet presses charges and a judge is on the way, but while they wait on the judge, Nancy falls in a sewer hole and Lou is the only person small enough to help pull her out, so all is forgiven.
Nellie comes home for a visit and discovers that Nancy is more of a spoiled brat than she ever was. Nancy doesn't want to have anything to do with Nellie and snubs her every chance she gets. Laura and Nellie act like they are best friends. Everyone is paying attention to Nellie because it's her birthday and they haven't seen her in a while and so Nancy is feeling left out. She decides to run away. Nels and Nellie go to look for her, and they find her and it seems she has changed. When Nellie leaves, the find out that Nancy hasn't changed.
Sarah Carter's mother died so her father comes for a visit. He's a wealthy newspaper man from the big city and wants the Carters to come back and live with him. He "buys" the boys' affection with nice things. He helps Sarah out in her office by helping her with her layout, but it's not the way she wants it and she is happy with her life there and so her father leaves.
The Younger brothers haven't been out of prison very long, when they decide to hold up Mr. Edwards for some ransom. They decide to turn themselves in so they can get the reward money but they don't have all their marbles.
Laura needs something to fill some time so Almanzo tells her about a book writing contest. He convinces her to write her stories down that she told him about growing up. She travels to Minneapolis to work with a publisher but they want to make too many changes to book.
Albert has fallen in with the wrong crowd so Charles quits his job and takes him home to Walnut Grove. Unfortunately, part of Albert's problem is that he has gotten addicted to morphine and he steals some from Doc Baker so the problems persist.
Doc Baker realizes that something is wrong with the morphine in his pouches and he tells Nels that the company is very responsible and loyal and so something had to happen to it when it came here to Walnut Grove. He says no one messed with in the store and he had Albert drop it off for him. Doc Baker realizes that Albert must have switched the morphine for powdered sugar. He tells Charles to watch for symptoms of addiction. Charles finds the morphine in Albert's shoes and gives it back to Doc Baker. When Albert goes looking for it, Charles confronts him but Albert ...
Laura and Almanzo welcome their second child, a baby boy. They are undecided as far as names go, and Doc Baker examines the child to make sure he's in the best of health. But one fateful morning, the Wilders awaken to find their new baby deceased. Right away, a dumbfounded Laura places blame squarely on Doc Baker, whose business starts to wane and he considers leaving Walnut Grove. But, when Rose suddenly comes down with small pox, the good doctor is their only hope.
Jason Carter wants a job so he can buy his mother a birthday present. He starts working for Ruthy Leland. They become close friends. His mother thinks she is being too nice, but since Ruthy is dying from a sickness and won't be around for too long, she doesn't have any reason not to give this stuff away.
When Willie announces his plans to marry sweetheart Rachel Brown and manage the hotel-restaurant bearing his sister's name, Mrs. Oleson tries to interfere. But Willie impresses his wife-to-be - and his father - when he stands his ground to his meddlesome mother once and for all.
The father of Matthew Rogers, the mute boy Mr. Edwards has been caring for, arrives to reclaim his son. A heartbroken Edwards moves in to Laura's new boarding house, where newlyweds Willie and Rachel Oleson, and eccentric Englishman Sherwood Montague have also taken up residence.