When the body of Laura Palmer, the local Homecoming Queen, is discovered washed up on a riverbank, FBI Special Agent Dale Cooper is called in to investigate the crime and the mysterious circumstances surrounding it.
James Hurley, Mike Nelson and a vengeful Bobby Briggs are released from the local jail; Agent Cooper and Sheriff Truman discover more dark secrets about the life of Laura Palmer; Doctor Hayward turns in his autopsy on the murder victim; Big Ed Hurley reveals that he was drugged at the Roadhouse and Catherine finally reveals her plans to take control of the Packard sawmill.
Donna Hayward and James Hurley confess their love for one another; Leo holds Bobby Briggs hostage; Ben Horn and his brother, Jerry, make a trip out to One-Eyed Jacks; Agent Cooper has his first of many strange and troubling dreams.
Audrey tells Cooper she left him the message about One Eyed Jack's. Cooper tells Truman he can't remember the details of the dream, but says it is vital to solving the crime. After Albert upsets everyone in town and ends his autopsy. Albert and Truman fight and Bobby, James and Leland make a scene at Laura's funeral. Maddy, Laura's cousin, comes to town and Hank Jennings, Norma's husband, gets released on parole. Cooper doesn't trust Dr. Jacoby.
Cooper talks to Dr. Jacoby, who thinks Leo Johnson is the killer. Gordon Cole, Cooper's superior, gives him Albert's report. Josie Packard spies on Ben and Catherine. Hawk hunts down the One Armed Man and Mrs. Palmer talks to Cooper and Truman and says she is having visions about the killer. Cooper realizes it is the same man from his dream. The bird which attacked Laura belonged to Leo's friend, Jacques Renault. Hank Jennings has his parole hearing and afterwards, calls Josie and threatens her.
Cooper and the rest of the team have tea with Log Lady. She tells them about a third man after Leo and Jacques. At Jacques' cabin, Cooper, Hawk and Truman find the bird that killed Laura. They find out it can talk. A broken poker chip belonging to One Eyed Jacks is found and Hank returns home to Norma. The Briggs family pay Dr. Jacoby a visit and Audrey takes the job at the perfume counter. Shelly gets her revenge on Leo and Audrey sets up a surprise for Cooper.
Audrey gets the job at the perfume counter and discovers it is a recruitment center for One Eyed Jack's. Donna, Maddy and James lure Jacoby from his office. Cooper and Big Ed go under cover at One Eyed Jack's and Nadine finds out her drape runners were rejected. Josie has fears about the Mill and Truman asks for Cooper's help to settle them. Leo has his eyes on Bobby and the bird and Bobby sets up James. Ben and Josie get together and plan to double cross Catherine.
Audrey is hired on to One Eyed Jack's crew, but is trapped when her father arrives. Jacques Renault reveals details about Laura and the cabin. Andy saves Truman and arrests Jacques. Lucy surprises Andy. In the park, Dr. Jacoby is attacked. Laura's tape is found and James, Donna and Maddy manage to find the necklace. Leo traps Shelly and sets it on fire. Hank takes Catherine to the mill and chases down Leo. Nadine overdoses on sleeping medication and Leland finally gets revenge. Cooper is shot three times when returning to the hotel.