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A frightened Mary Richards faces a contempt charge for refusing to reveal a news source, and her lawyer doesn’t make the legal battle any easier as he spends more time researching ways to win her than on the case.

Television news gal Mary Richards receives a notice from the Internal Revenue Service that her last year’s tax return is going to be audited and decides that absolute honesty will be the best policy. When agent Robert Brand appears, Mary tries her best to make him feel comfortable. While not exactly a stick-in-the-mud type, Brand proves to be a meticulous individual dedicated to unearthing the last detail of Mary’s income. She has kept complete records, however, and she produces data to back up her claimed deduction for taking children on a YWCA picnic and buying them ice cream. She even produces the signed ice cream sticks as receipts. Finding himself attracted to Mary, Brand stretches his investigation over a period of several days. Ultimately, he invites her out to dinner – if she will lend him ten dollars.

Phyllis suffers the ultimate indignation when she’s forced to seek a job after Lars suggests she live within a budget and cuts off her credit cards.

Mary Richards arrives in Minneapolis-St. Paul and her long-time friend, Phyllis, finds her an apartment. Although this leads to a conflict with the girl living upstairs, Rhoda Morgenstern, who wanted the apartment herself, the two become friends. Mary starts work at a strange new job – associate producer of a news program for a television station. Her boss is Lou Grant. The following day, Mary’s ex-boyfriend, Bill, shows up from out of town and she invites him to her apartment that night. The evening proves to be a disaster when Lou shows up intoxicated and insists upon using her typewriter to write a letter to his wife. While Lou is typing, Bill shows up, and before long it is apparent the romance between Mary and Bill will never be rekindled.

Lou happily makes the announcement to the news staff that Edie is going to march down the marriage aisle again, but not with him. Hoping to keep Lou as a friend, Edie invites her ex-husband to her wedding – which brings out all the animosity over her remarriage Lou has tried so hard to hide.

When writer Wes Callison quits his job at the station writing for Chuckles the Clown, Mary tries to help him develop a five minute humorous spot on the news show, but it fails. Wes decides to try out a comedy routine at a small nightclub and invites Mary, Lou, Murray, Ted and Rhoda. Mary and her friends do the best they can in the audience, but Wes is a flop and decides to return to writing for Chuckles.

Mary Richards’ parents are having a difficult time adjusting to their new home in the city. Mary’s father misses his old chums and Mary tries to help him make new friends. Mary takes her father to lunch with Lou Grant, but the two have nothing in common. Mary decides she will invite her father to have dinner with her so they can talk it over. A family crisis arises, however, when Mary has to tell her mother that the dinner invitation doesn’t include her.

When the apartment directly below Mary Richards’ becomes available, she spreads the word at the television news office where she works. Newsman Ted Baxter looks the apartment over, likes it and, to Mary’s chagrin, decides to move in. He is encouraged repeatedly to do so by Phyllis Lindstrom, who would like a “celebrity” living in the building. The finicky Ted brings in a law student to check the lease and newsroom boss Lou Grant tries to help Mary by pointing out to Ted all of its disadvantages. Ted is not fazed, however, until Lou reminds him of the moving expenses he will incur. As a result of this, Ted reconsiders his decision to move.