The Doctor and Jo Grant land in the middle of a prison break, only to find that the Master has hypnotised many people. After their trances are broken, the Brigadier informs the Doctor that they all work for the Freedom Corporation, which had been set up thirty years ago. The Doctor decides to investigate the Freedom Corporation. He attends a demonstration given by Gerald Gooder to show off his time machine. The Doctor is relieved to find that Gooder doesn't know what he's doing, but is still suspicious. Late at night Jo and he sneak in to the building. They find Gooder destroying their prototype time machine. They follow Gooder to find the Master, who traps the Doctor in the construct. The Doctor and Jo are trapped, with no way out.
Meanwhile, the Brigadier attempts to negotiate with the Master in order to rescue the Doctor and Jo. The Brigadier allows the Master access to his time machine, but the Master instead turns on a device that sends out time waves, causing everything on Earth to regress backwards in time. The Master is immune to the effects.
The Doctor has given up hope of getting out of the construct. To his and Jo's surprise and delight, the TARDIS appears, and the Doctor's memory of time travel is fully restored. He realises the Time Lords restored his memory and his TARDIS to him so that he can rescue Earth from the Master's device. The Doctor, seeing his freedom at hand, is sorely tempted to escape from the Time Lords and lose them in the Time Vortex. Jo's pleading, as well as the realisation that the Time Lords will find him anyway, convince the Doctor to come to Earth's aid. He convinces the Master to reverse the device. The Master is recaptured.
The Doctor and Sarah are staying at the home of Rector Adams, who has rescued the Doctor from near-drowning. The rector has received an invitation to Lady Huntingdon's ball and invites the Doctor and Sarah to accompany him. The Doctor isn't interested and leaves for the TARDIS with Sarah. However, on the way, he discovers a double-decker bus in the woods and decides to attend the ball after all.
At the ball, the Doctor sees Iris Wildthyme and talks with her while Sarah dances with a young man named Turner. Turner's conversation leads Sarah to suspect he is not from this time, and he admits he travels with Iris.
The Doctor speaks with the hostess of the ball, Lady Huntingdon. She gives this ball annually to find suitors for her granddaughter Bella. Whoever marries Bella will inherit Lady Huntingdon's estate. Bella dances first with the Doctor and then with Turner.
At the end of the ball, the Doctor takes a drunk Iris home. She admits that her plan is for Turner to marry Bella and inherit the estate. The Doctor discovers that the double-decker bus is Iris' TARDIS. Meanwhile, Rector Adams leaves the ball without Sarah, who has decided to stay for a bit. She follows Bella and Turner as they sneak out into the garden.
The Doctor and Iris are attacked in her TARDIS by some large creature. They scare it away with some flares. Turner drives Sarah home, but en route they find the mauled body of the rector.
The next day, Iris, Turner, Sarah and the Doctor are dining at Lady Huntingdon's estate. Lady Huntingdon tells Iris that she will allow Turner to marry Bella, but she wants something in return - Iris' TARDIS. She admits to not being from this time and place. Meanwhile Bella tells Sarah that her grandmother is the one who killed the rector.
Angered by Iris' refusal to turn over her TARDIS, Lady Huntingdon attacks Iris. Bella transforms into a tiger to stop her grandmother, who also transforms and runs off to Iris' TARDIS. The Doctor and Iris reach the TARDIS but Iris is attacked by Lady Huntingdon. The Doctor finds a Time Lord message carrier in Iris' TARDIS and traps Lady Huntingdon in it.
Next morning, Iris has left in her TARDIS, leaving Turner behind. Bella agrees to marry him.