After taking an aptitude test, Bart is held back a grade, and Lisa is skipped ahead, landing them both in third grade at the same time, and in the same class. Tension develops between them, but they are forced to work together when they become lost on a school field trip.
The family is just bored with reality shows on the six major networks. Luckily, Bart has a suggestion: buy a satellite dish. They do when Homer makes money from betting on a horse named No Risk. Eventually, they buy a satellite system with over 500 channels. Homer and Bart get addicted to it, leading Bart to not study for an important achievement test that is about to occur, even as Lisa is studying. During the test, Bart begins hallucinating, showing what he's seen on TV in the school. Once the test is done, the results are in: Bart fails the test and is held back to the third grade, but Lisa also passes the test and goes up to the third grade, where they meet their new teacher. Sibling rivalry ensues.
In third grade, Bart and Lisa each have their own results. Bart is doing extremely well on tests, while Lisa has a hard time adjusting to the conditions of third grade. Their new teacher decides to clamp their desks together after Bart gets an A on a test and Lisa got an A- also because she thinks that Lisa needs Bart's help. Bart says that the test was easy and recites all of the answers to Lisa, which he had memorized from last year in third grade. Lisa proclaims that Bart cheated but the teacher didn't hear Bart's recitation and tells Lisa to stop being jealous and changes Bart's grade to an A+. They are made buddies as part of the buddy system on a field trip to Capital City. When they are there, they hear that the flag for the state Springfield is an embarrassment (it contains a Confederate flag, despite the state being from the North), and their teacher assigns for homework an assignment to design a new flag. Lisa calls Marge as she designs her flag, which says "To Fraternal Love". On the phone, she complains about and makes fun of Bart, unmindful of the fact that Bart is overhearing the conversation on another phone. A vengeful Bart then changes the flag.
The next day, Bart, Lisa and the other third-graders hand over their flag designs to the Governor. When the Governor sees Lisa's flag, she starts to cry and displays the flag which now says "Learn to Fart". This appalls Lisa, as Bart innocently admonishes her for making the Governor cry. Later, Bart again teases Lisa and they get in a fight and miss the bus heading back to Springfield. The fight brings them out of the parking lot and into the forest. As a result, the two wind up getting lost.
Back in Springfield, Principal Skinner informs Homer and Marge that Bart and Lisa are missing. He says that they will not spare any expense to find Lisa but not Bart, and have already elected a Class Clown pro tem (Milhouse) in Bart's absence. They go to Capital City to find them, but Bart and Lisa are confronted by a family of hillbillies, who save them by driving them back to Capital City. Marge is ecstatic on seeing her children safe and sound. Principal Skinner, worried about the effects of placing Bart and Lisa in the same class, suggests that they return to the "status quo" - both Simpson kids go back to their proper grades. Everything is back to the way it should be.