While trying to get Maggie to say her first words, Marge recalls what happened a few years back when Lisa was born, when they first moved into their present home, and what Lisa's first word was.
When Homer, Marge, Bart and Lisa unsuccessfully try to get Maggie to speak, Marge tells the family the story of when Lisa said her first word. Bart asks Marge his first word and a flashback is shown: Homer and Marge were in the middle of having sex when a toddler-Bart opens the door causing him to shout "Ay, Caramba!" in surprise. Marge then begins telling the story by describing the spring of 1983 as a time when "Ms. Pac-Man struck a blow for women's rights." It's March of 1983, and the Simpson family (minus Lisa and Maggie) originally lived in an apartment complex on the Lower East Side of Springfield. Homer comes home from work singing "Girls Just Want To Have Fun" when Bart happily runs up to his father shouting "Homer." Homer asks Bart to call him "Daddy" but Bart mischievously calls Homer "Dohmer" causing Homer to get outraged and shout his usual catchphrase "Why you little--!" and strangle Bart.
One day, after Bart flushes Homer's wallet down the toilet, Marge reveals to them that she is expecting another baby, which leads to Bart imagining a new brother who he can use as a scapegoat for his own horrible behavior, such as writing on the walls, using his tricycle to jump a ramp which happens to lean on the baby, and using the baby to clean up the table when he spills his milk. Marge later points out to Homer that with another baby on the way, they're probably going to need a bigger place. After talking to a real estate agent, who explains that the only houses that Homer and Marge can afford are in a neighborhood known as "The Rat's Nest," they go house hunting while having Marge's older sisters, Patty and Selma, babysit Bart. Homer and Marge try to look for houses, including a houseboat that Captain McAllister has until now. After unsuccessful attempts, the family finds a house on Evergreen Terrace and buy it with a $15,000 down payment from the sale of Grampa's house. Homer promises Grampa he can live with them as thanks for his gesture, only to put him in the retirement home after just a few weeks.
In 1984, the Simpsons move into their new Evergreen Terrace home, with the Flanders family introducing themselves as their new neighbors. Ned Flanders has just bought a TV tray from the hardware store, and Homer agrees to borrow the tray from him (eight years later, in the present, the tray is still in the Simpsons' living room). Bart turns two-years-old, and for the first time, he watches Krusty the Clown, as well as Itchy & Scratchy. Krusty does a promotion for the 1984 Summer Olympic Games with his Krusty Burger chain, which is the "Official Meat-Flavored Sandwich of the 1984 Olympics." The promotion offers scratch-and-win game cards in which people can scrape off the name of the event from the game card, and if the U.S. wins a gold medal, that person wins a free Krusty Burger. Krusty's accountant assures him that the cards are rigged, "all in events that Communists never lose", but the Soviet Union boycotts the Olympics, and with this, the USA easily dominates every event. Krusty's accountant gloomily revises his estimate of what the promotion will cost him personally, from zero to $44 million. On the air, Krusty angrily says he will personally spit in every 50th burger. Homer, however, finds those odds to be really acceptable, and continues getting a steady supply of free Krusty Burgers from redeeming his winning game cards along with the hundreds of other Springfielders lining up for miles outside the Krusty Burger restaurant.
Bart is forced to give up his crib for the new baby--Homer ends up building Bart a new bed, which actually turns out to be pretty good, although the clown-headboard is very terrifying to the young toddler. While watching TV, Marge goes into labor and Homer drives her to the hospital--Bart stays with the Flanders family until his parents come home from the hospital with the new baby. After Lisa's born, Homer's happy to have a daughter while Marge points out to her husband that, after reading a parenting magazine, Bart may end up being jealous of Lisa. After finally meeting his new sister, Bart decides that he hates Lisa. Bart starts to become jealous of Lisa, and plays various pranks on her--such as shaving her head bald, sticking a bunch of stamps on her and putting her in a mailbox, and even shoving her through the Flanders' doggy door (he gets a timeout for each one). He blames Lisa for his problems and is about to run away, until she says her first word, "Bart." Bart discovers that Lisa can talk, and she can even say "David Hasselhoff," "Mommy," and "Homer" but not "Daddy," much to her father's annoyance. After this, Bart holds baby Lisa for the very first time, and seems to appreciate her more from then on.
However, back in the present day, the flashback ends and Bart and Lisa are fighting. Homer takes Maggie upstairs and tucks her in, saying that "the sooner kids talk, the sooner they talk back," and that he hopes that Maggie never says a word. When he leaves her bedroom, Maggie removes her pacifier and (unheard by the rest of the family) says her first word, "Daddy" just before she falls asleep.