Nicholas seeks out the assistance of his uncle's clerk Newman Noggs who quickly arranges a position for him as a French tutor. With his mother and sister faced with eviction by his Uncle Ralph however, Nicholas opts to leave London. He and Smike head to Portsmouth thinking they may get work on a ship. He soon meets Vincent Crummles who suggests that the handsome young Nicholas consider a career on the stage. In London meanwhile, Kate is making her mark with the Mantalinis but Mr. Mantalini's wastrel ways have finally caught up with him and they go bankrupt. Of far more concern to Kate however is the fact that Lord Frederick Verisopht and Sir Mulberry Hawk now know where she lives and are pursuing their advances.

Nicholas and Smike leaves the theater company and return to London. He's no sooner arrived than he hears Sir Mulberry Hawk in a dining hall making objectionable remarks about his sister Kate. An argument ensues and when Hawk tries to leave in his carriage, a accident ensues causing severe injury. Meanwhile, Wackford Squeers and his son Wackford Jr. arrive in London intent on locating Smike. When they find, the poor lad is locked in a pantry. Nicholas has the good fortune of meeting Edwin and Charles Cherryble who not only offer his a well paying job but the use of a cottage at a very reasonable rent.