Following the death of his father, young Nicholas Nickleby travels to London with his mother and his sister Kate in hopes that Uncle Ralph might be in a position to offer some assistance. However, Ralph had little contact with his brother's family and feels no sense of obligation. A hardhearted businessman not at all surprised that his brother died penniless, his offer to Nicholas is to help him secure a not-so-ideal teaching position which Nicholas manages to obtain with Wackford Squeers. As for Kate, her uncle arranges a position with a dressmaker.

Nicholas and Smike leaves the theater company and return to London. He's no sooner arrived than he hears Sir Mulberry Hawk in a dining hall making objectionable remarks about his sister Kate. An argument ensues and when Hawk tries to leave in his carriage, a accident ensues causing severe injury. Meanwhile, Wackford Squeers and his son Wackford Jr. arrive in London intent on locating Smike. When they find, the poor lad is locked in a pantry. Nicholas has the good fortune of meeting Edwin and Charles Cherryble who not only offer his a well paying job but the use of a cottage at a very reasonable rent.