Homer tries to boost Lisa's confidence by entering her into a beauty pageant. By default, Lisa earns the crown and she uses her new platform to inundate Springfield with public service announcements.
Springfield Elementary School is having its carnival, deemed "The Happiest Place on Earth". Principal Skinner deters a lawyer representing Disneyland and his muscular goons with surprising physical force. Meanwhile, Lisa procures a caricature of herself from an artist. Peering at the crude drawing of herself and observing the surrounding crowd's reaction, Lisa is horrified at her picture. Elsewhere, Homer has eagerly entered the raffle at the fair, with the grand prize being the chance to ride in the Duff Beer blimp. He fantasizes about the possibilities of riding in the blimp for a moment before yelling at Ned Flanders for winning the second prize, a shoe buffer. However, Homer's anger is quick to disappear when Skinner announces that Homer is the winner of the grand prize.
Back at home, Lisa is sullen over her realization that she lacks outer beauty. Homer walks by her room and finds Lisa crying on her bed. He notices the problem, but he is unable to fix it. After discussing the concept of beauty with his buddies at Moe's, he is saved through a TV ad. Homer sees that Laramie Cigarettes is sponsoring this year's "Little Miss Springfield" pageant. The entry fee for the pageant is $250, but Homer is currently broke. He chooses to sell the Duff Blimp ticket to Barney (who receives money from being a lab rat for medical testing) to get the money. Homer reveals his ticket to Lisa, who is still dismayed over her appearance and refuses to participate in the pageant. However, Marge shows Lisa that Homer got the entry fee by selling his ticket to the Duff Blimp ride-along. Lisa, realizing how much that meant to her father, decides to enter the pageant.
At the pageant sign-ups, two girls warns Lisa about a formidable competitor in the form of Amber Dempsey, a blonde girl with eyelash implants (which are illegal in Springfield but not in Paraguay) to make her act more adorable to the judges which helps Amber win every beauty pageants. After some makeovers at the beauty parlor and encouragement from her family, the day of the pageant arrives. At the introductions, Lisa emphasizes her goals of making Springfield a better place, while Amber catches the adoration of everyone with her eyelashes' blinking. Lisa's talent segment consists of a jazzed-up rendition of "America the Beautiful" and "Proud Mary". After Krusty's questions with the little girls (where Amber once again relies on her eyelashes), the runner-up is announced as Lisa, and the winner is Amber. However, at her first appearance at an opening ceremony for SHØP, rain and thunderstorms occur, and a lightning bolt strikes Amber's scepter. She is hospitalized for her injuries, and Lisa takes her place as the acting Little Miss Springfield.
As Little Miss Springfield, Lisa unwillingly becomes a symbol for Laramie Cigarettes. She begins to fight back by protesting against the dangers of cigarettes at her appearances, and also vows to target the corruption of Mayor Quimby. Quimby and the Laramie officials meet to look for a way to dethrone Lisa as Little Miss Springfield. They find it through a technicality on her entry form; when Homer saw an area marked "Do not write in this space" on the paper, he wrote under it: "Okay". Amber is restored to her place as Little Miss Springfield. At home, Homer apologizes to Lisa for costing her the title, but she is grateful to him as he entered her in the contest to help her self-esteem which it has. Homer requests that she remember it "the next time I wreck your life", to which Lisa gladly agrees.