The Independence Day celebration in Walnut Grove is threatened when taxes are increased. A Russian immigrant shows the people why America is a great place. Even though the immigrant lost his land since he couldn't pay his taxes, he was happy to be in America. He considered it to be the best place to live in the world.
The school children have saved up some money to buy the Reverend a birthday present. They give the money to Mary, who is in charge of buying the present. Laura convinces Mary to buy something that they could sell to people with the hope that they could buy Reverend Alden a better gift. The plan backfires.
After Julia Sanderson's death, her three children stay with Grace, with help from Mr. Edwards. When Charles is unable to find someone to adopt all three children, he has to make the difficult decision to place them in separate homes. At the very last minute, Mr. Edwards makes a monumental decision: he marries Grace - and they take on all three children.
A widowed mother named Julia Sanderson (Patricia Neal) learns she has a terminal illness and, with no close relatives to care for her three children, John Jr., Carl and Alicia, she gets Charles to promise to find the children a new home after she dies. Meanwhile, Laura and Mary rescue some abandoned puppies, and the relationship between Mr. Edwards and Grace Snider begins to blossom.
Laura and Grace Snider both need dates for the annual Spring Dance, but those they have their eyes on seem not to be interested. Caroline shares with them a 'womanly wile' she used on Charles to get his attention, but when Laura and Grace try it the consequences are not what they had hoped for. Then Charles reminds Caroline of what actually happened when she tried it on him, and she changes her advice to Laura and Grace, with a happier outcome.
In spite of a rocky start and over Charles' strong objections, the Olesons accompany the Ingalls on a family camping trip and, surprisingly, the oft-feuding families begin to enjoy each other's company. But will the warming relationship between them survive a cold plunge into a rushing river and Willie's rash decision to add a special leaf to his collection...the one that Mary won't touch?
It's time for baseball! After losing badly last year, Walnut Grove expects to win with their star pitcher, Mr. Mumford. People in Walnut Grove are so confident that they are going to win, they place bets on the game. However, Mr. Mumford's wife won't let her husband play because of the gambling. Caroline convinces Mr. Mumford's wife to let her husband play on the condition that any money made from the game goes to the church.
Mary is beginning to do worse in school because she has a hard time reading the blackboard. When Mary first gets her new glasses, she really likes them. The other school children begin to tease her. She purposely loses her glasses, until she realizes that her teacher, who wears glasses, has a boyfriend.
After the mill closes, Charles is unable to pay off his debt at the mercantile. Mr. Hanson is forced to close the mill after one of his big customers declares bankruptcy. This was after Hanson had already shipped them a bunch of lumber. Charles had been expecting two months worth of wages before Hanson was forced to close down. Charles must taken on several jobs at the same time. Mary gets a job to help the family, while Laura does the chores at home. When the bill finally gets paid, Nels tells Charles that he thinks Charles is the richest man in Walnut Grove, since he has a very loving family.