When Milhouse moves away from Springfield, his father and Bart realize just how much he meant to him. After a bout of sadness Bart finds friendship with an unlikely source: Lisa. Meanwhile, Homer Simpson pretends to be a hobo.
During a school field trip, Nelson gets kicked off of the bus by Mrs. Krabappel for not having his permission slip for a field trip. Krabappel thinks Bart is being mean to his teacher but it ends up being Milhouse who talks back to her. Bart notices a change in Milhouse's behavior as he calls Krabappel "crab-Apple" which really pleases Jimbo, Dolph and Kearney. Milhouse gets fresh to Krabappel, wanders away from the group and causes mischief with Bart, and tells Bart that he doesn't care what anyone thinks of him anymore. Finally, Milhouse reveals that he is moving to Capital City with his mother, she got a new job there (although it's mainly because she needs a fresh start). This saddens Bart to the point he can't laugh at an Itchy and Scratchy cartoon. Bart tries to befriend Ralph Wiggum, which doesn't work.
Bart visits Milhouse in Capital City, only to find that Milhouse has changed: he has dyed his (now spiky) hair white, is wearing fashionable clothes, and is cultivating a "bad-boy" image. He even goes so far as to give Bart a wedgie in front of his new friends. He and his friends then start to tease Bart, calling him a "Springfield baby". At home, Bart watches home videos of him and Milhouse in kindergarten and cries. After seeing how depressed Bart is, Marge suggests he spend more time with Lisa. The two begin to bond by washing the car and riding bikes, and after they discover an Indian burial mound together, they become best friends. They even turn down offers to hang out with their other friends. Even at school Krabappel and Skinner are surprised by the sudden dynamic between Bart and Lisa. Groundskeeper Willie however tells the principal and teacher that the siblings' friendship won't last.
After returning home one day, Lisa is surprised to see that Milhouse has returned to Springfield since his father won custody of Milhouse via court order. Milhouse also reveals that his friends in Capital City don't like him after he peed in his sleeping bag when a burglar got in. After she finds out Bart told Milhouse about their secret Indian burial mound, Lisa feels that Bart is acting like their friendship never existed and that he has been using her to fill a void. Bart, however, shows her that he still values her as a sister by giving her a set of cards with nice things he will do for her on them, and the two hug.
At Moe's Tavern, Apu and Manjula are celebrating their anniversary, and Homer realizes he does not have anything for Marge for their anniversary. After being pushed out of the bar for being taken by the man's curse, an extremely drunk Homer sits on the street and people give him money. He dances and earns enough money to buy Marge some flowers.
Homer continues his panhandling, and eventually makes enough money to buy Marge a pair of diamond earrings. When he continues panhandling afterward, angry bums bring Marge to see what Homer is doing. Marge is mortified and offended, but Homer insisted that he was only doing it for her out of the goodness of his heart, and for that she is unable bring herself to place the earrings in the trash. She instead tells Homer she doesn't need nice things to know how much he loves her. In order, to remind Homer for what he has done Marge tells that him she is going to keep the earring and wear them at social events.
The episode finishes with Isabel Sanford at the TV and Radio museum, pointing out how sitcoms usually resort to using sappy endings for their episodes, and finally begging George Jefferson to come back home.