When Kimberly transfers to public school, she causes Willis embarrassment by insulting the class president and trying out for the boy's swim team. Drummond hires a new housekeeper with an impressive resume.
Dudley, too shy to talk to Lisa, his love interest, turns to Arnold to help him woo her with poetry. However when the plan backfires, Arnold finds himself unable to get rid of Lisa, who is in love with him, and unable to talk to Dudley who is mad at him for stealing Lisa.
Willis steps in to mediate a feud between rival gangs, which has been intensifying. When the effort fails, Willis finds out his personal safety is in danger, so he decides to buy a gun, a move that could really exasperate matters.
Arnold and his classmates gets really upset when a substitute teacher, filling in for Miss Chung, really piles on the homework. When the teacher accidentally strikes Arnold, who is fooling around in class, Arnold and Dudley decide to lie about the incident in hopes of getting him removed.
A cassette tape, containing a recording of Arnold and Willis' deceased mother, is discovered in a trunk that is returned to the boys. When Drummond innocently plays the tape, it triggers Arnold's deep-seated grief about the loss of his mother.
When Arnold is bullied by a kid in the building, Drummond advises him not to resort to violence. However, when Drummond himself is bullied by the kid's father, who happens to be the building manager, he has trouble following his own advice.
When Willis hears from a friend that Drummond's company does not hire blacks, he goes in for an interview using a fake name. When he is turned down for the job, he accuses the interviewer of being prejudice and "fires" him.
Drummond and Mr. Ramsey learn the truth about Mr. Horton, the seemingly friendly bicycle shop owner with a very sinister side. It soon becomes a race against time to get details out of Arnold after learning that Dudley is about to become Mr. Horton's latest victim.
Kimberly impresses professional skater Dorothy Hamill with her ice skating, and is taken under her wing. But Kimberly is overwhelmed by the hard work it takes to become a professional skater, and devises a way out.
Arnold, realizing that Kathy is struggling to fit in at public school, encourages her to become hall monitor. He quickly realizes that he has created a monster when she begins to take her job too literally.
As a reporter for the school newspaper, Arnold learns that drugs are being sold on school grounds. This attracts the concern of First Lady Nancy Reagan, who comes to the school to talk about her anti-drug campaign.