Lilly leans on Miley for support, when the obsession for perfection causes Lilly to lose her first job. Lilly stays at Miley's house because her mom is going to be disappointed with Lily if she finds out that Lilly got fired from her job.
Lilly's Mother gets a job in Atlanta, but Lilly doesn't want to go there. Miley decides that Lilly should move in with her, but being roommates quickly takes a toll on the girls friendship. Lilly decides to move in with her dad but later on, Miley talks to her and Lilly moves back in with her.
Miley starts to miss her old life in Tennessee. She dreams about blue jeans, her horse. Oliver gets an offer to go on a concert tour, but he won't be able to see Lilly for six months. Jackson thinks that it's time for him to move out of the house.
Jackson likes his new home in his new bachelor pad, but finds out that the place is a crumbling wreck. Miley is having second thoughts of going back to the simple life in Tennessee. Oliver is thinking of giving up the tour to be with Lilly, while Lilly tries to figure out what she will do without Oliver and Miley in her life. Jackson decides to move back in with his family.
The Stewarts move onto their new ranch home, but Miley and Lilly are aghast that Robby Ray has moved Miley's old bedroom furniture, complete with white bunk beds, pink walls, pink bedding, dolls, a stuffed unicorn and Rainbow Piggy, into their new home, so they set out to make some changes. Meanwhile, Jackson must befriend an obnoxious new kid, T.J., in order to get close to his beautiful cousin Siena who lives next door.
Robby misses the deadline to register Miley for school, but when Principal Luger makes an exception for Hannah Montana, the problem is solved. However, Miley finds that attending school as Hannah attracts much more attention than she'd like. Meanwhile, Jackson is paranoid when Siena asks him out on a date.
Miley believes that Robby has sacrificed his personal life for her career, so she sets him up on a blind date with Lori, her school nurse. Meanwhile, Jackson is worried about his first kiss with Siena.
While Hannah is taping a Christmas TV Special with singer Sheryl Crow, brother Jackson is pining away for his new girlfriend Sienna who is overseas on a photo shoot in Peru. Best friends Lilly and Oliver are afraid to tell Hannah/Miley that her boyfriend Jake has cheated on her while he is on location filming a new movie.
Miley cancels a special father-daughter afternoon with her dad to go on a first date with Jesse instead. She gets mad when Jesse answers a phone call from his father because she blew off her father to spend time with him. She then holds a concert as Hannah in honor of those in the military and their families who don't have the fortune of having them home.
Miley convinces Lilly that she should try to ride her horse, Blue Jeans. Unfortunately during her first ride, a snake bites the horse leading to injuries for both, including what could be a fatality for Miley's beloved pet.
Jesse rejects Miley after the Hannah secret interferes with his life. Miley and Lilly both apply to the same college. Lilly gets in and Miley doesn't get in. She drives 200 miles to Stanford college and she almost reveals her secret to the lady of the college.