Kelso returns on New Year's Eve 1979 to celebrate, while Red and Kitty rethink their plans to move to Florida.

Kelso invites the gang to an expensive dinner but skips on the bill, leaving Eric and Donna in the restaurant with no money. The two of them decide to shed their "square" personalities and get back at the gang. Bob is upset that Red didn't offer him a job at Price Mart.

Donna finds a pair of panties in the Vista Cruiser and thinks that Eric is cheating on her with his lab partner. Everyone is in for a big shock when they find out who the panties really belong to. Red's doctor's appointment shows that he has high blood pressure, so Kitty puts him on a strict diet, which he finds inedible. Kelso gains a new nickname due to a mishap in the cafeteria.

The Foreman's have a garage sale and Hyde makes "special brownies" to help out. When Red, Kitty, Bob, and Midge accidentally eat a plate of the brownies, a stoned Red sells the Vista Cruiser.

The guys go see Star Wars and are all completely blown away by it. Red asks Eric to hang out with his boss's son now that he's started working at the plant full-time again. David was an awkward kid the last time Eric saw him, but now he's a hunk who likes reading Donna's short stories. Also, Laurie starts hitting on Kelso out of boredom.

Hyde returns from jail only to find Red beyond furious and ready to kick him out of the house. Afraid that he'll turn the other kids into dope fiends, Red asks Eric if Hyde has ever pressured him to do drugs in the past. Eric wonders if he should confess the truth to Red in order to keep him from forcing Hyde out. Elsewhere, Leo visits the Formans to speak on Steven's behalf while Donna uncovers the reason behind Jackie's new found obsession with Hyde.

Since no one else is around, Jackie confides in Eric that she thinks she might be pregnant. Eric passes the news on to Donna, who tries to get Jackie to tell Kelso. The incident inspires Donna to go on birth control pills. Her decision inadvertantly causes Eric a lot of grief when Bob and the Formans find out.

The guys paint a pot leaf on the water tower and Kelso falls off trying to fix it because everyone thinks it looks like the finger. Instead of going to the hospital they go to Eric's cause his mom's a nurse. When Eric goes to get her he walks in on his parents having sex. Having trouble sleeping and not being able to look his parents in the eyes leads his parents to believe he's on drugs.

Eric, Hyde, Fez, Kelso and Leo go to Canada to get some beer. Unfortunately, they get stopped on their way back across the border because Fez lost his green card. Donna tries to convince Jackie that she's being scammed by a modeling agency. Red gets a bonus at work: a Beta Max so he can tape something now and watch it later, but he forgets a vital step in the process.

Eric' cousin Penny, whom he used to tease unmercifully when they were younger, comes for a visit, and she's...grown some. All the guys are infatuated with her, much to Donna and Jackie's dismay. Jackie and Donna try to be hotter than Penny, with disasterous results. Kitty, feeling like she's not needed, wants to get a pet.

While trying to come up with a quote for the yearbook, the gang recalls how they met for the first time. They go through the times when they each met each other, no matter how embarrassing or stupid they were. They also try to work out a saying to put under each of their pictures. Kelso finally comes up with the perfect quote for them all, "It's been a long, strange journey...in Forman's basement!" The gang also realizes how strong their friendship is.

The gang will be split in half when high school graduation is over: Eric and Donna are all set to move into their Madison apartment, while poor Fez is about to be deported. The love triangle amongst the others grows more heated as Hyde and Kelso compete over an indecisive Jackie. But this tense situation is put aside so that the six friends can go camping together the night before graduation. Laurie tags along and dramatically changes Fez's life. Back at the Forman house, Red gives Kitty medication to help her deal with her depression over Eric's imminent departure.

Eric skips school with Donna, Hyde, and Kelso for the first time in his life. Unbelievably, the gang finds a keg in the middle of the road and sees it as a sign that they should throw a party. Problems arise, however, when they all realize that there's no beer tap after the party is in full swing. Meanwhile, Red and Bob have their suspicions about what the kids are up to and launch a full scale search of Point Place.

Eric has a new friend and Steven and Kelso can't stand it. Steven doesn't like him because he's rich and Eric doesn't give him a ride home anymore because Buddy has a Trans Am. Kelso, on the other hand, seems like a worried spouse. Eric starts to feel uncomfortable around him however when Buddy makes a move on him. Buddy apparently thought that Eric was also gay. And Red makes his first sale.

Red's mother Bernice has once again managed to make everyone miserable during one of her visits. While driving his grandmother home, Eric lashes out and tells her that it wouldn't kill her to be nice once in a while. Bernice promptly drops dead, leaving Eric to think he killed her. The entire Forman family (including Laurie and Red's brother Marty) comes together for her funeral while Eric gets drunk at a bar with the guys.

The gang goes skinny-dipping and Jackie gets sick. Hyde moves in with the Formans when his mom runs away with a trucker. Bob takes a liking to one of Midge's feminist friends.

The gang, looking for something fun to do on Halloween, revisits their old grammar school, where they find their permanent records. Looking through them, they find out some interesting things about each other. Fez discovers trick or treating.

Kitty is devastated after the police catch Donna and Eric having sex in the Vista Cruiser.

Hyde helps Jackie take a Zen approach to Kelso and Laurie, who introduce their relationship to Red at the Forman dinner table.

As punishment for being "dope-heads", Red gives Eric and Hyde a curfew. Laurie is all for it until she discovers that it applies to her too. Red booby-traps the house so that he'll know if there are any escape attempts, and keeps increasing the discipline, despite Kitty's pleas for leniency. Jackie is still trying to convince Hyde that she's the woman for him, but he's not buying it.

It's Prank Day according to Kelso, who manages to trick his friends twice with his stunts. The guys' attempt to retaliate backfires horribly when Red triggers their prank instead. But rather than venting his wrath on Eric, Red joins the prank war to show the boys how it's done. Meanwhile, Jackie throws an impromptu slumber party to cheer Donna up on her parents' wedding anniversary.

Kitty and Eric go to the Hub after a dentist appointment and catch Donna (who's drunk) skipping school with Casey. Neither Bob nor Joanne can exert any authority over Donna, so a frustrated Red intervenes while everyone watches. Meanwhile, Jackie suggests that Kelso kiss another girl so that they can reconcile. And Hyde and Fez try to decide what to do with some dead fish that they stole.

Kelso drops Jackie off in Chicago, but she is immediately homesick and reaches out to the gang for companionship. Eric finds out at the last minute that Kitty deliberately hid a letter outlining the vaccination shots he’s required to have before going to Africa for the year. He has his final Circle with the guys only to finally be busted by Red! As Eric says his good-byes to everyone, Hyde talks to Leo about his true feelings for Jackie and decides to follow her to Chicago…with disastrous results.

Eric's 17th birthday is coming up and he really doesn't want a party. Unfortunately, it's extremely obvious that Kitty is planning a surprise party against his wishes – she's even invited his older sister Laurie home from college for the event. Eric enlists Laurie's help in calling off the party while Kelso naively tries to attract her interest. And Donna, who's unsure about the state of her relationship with Eric, gets advice from Jackie on what to get him for a gift.

The kids decide to go to a disco but Steven doesn't know how to dance so Mrs. Forman teaches him to dance. Mr. Pinciotti walks in on them in a compromising position and believes they're having an affair. Kelso gets jealous of Fez because he thinks he's putting the moves on Jackie.