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.

Smike gets captured by Squeers but help is soon at hand from John and Tilda. Meanwhile, Nicholas is directed by the Cheerybles to meet Madeleine Bray.

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

Noggs and Cheeryble come to Nicholas’s and Madeline’s aid as Squeers and Ralph finally get their comeuppance and the secret of Smike's parentage is revealed.