Nicholas has been found employment by his Uncle Ralph at Dotheboys Hall, an academy for boys owned by the drunken and brutal Wackford Squeers.

Nicholas is appalled to find that Squeers is being cruel to the crippled boy Smike and makes plans to escape. Nicholas and Smike set out to London.

Kate is invited to dinner by Uncle Ralph, where she suffers from unwanted attention. On his arrival in London, Nicholas is informed of an accusation against him.

Nicholas refuses to restore Smike to Squeers' cruelties, so the duo leave London and find employment with Vincent Crummles and his company of strolling players.

Nicholas finds employment with the kindly Cheeryble brothers while Smike is in for a shock after Squeers arrives in London and begins plotting with Ralph.

Unknown to Madeline, Ralph and Gride have come upon some important information about her. Meanwhile, Smike falls ill after escaping from Squeers.