The arrival of dynamic new head teacher Karen Fisher heralds a fresh start for the school. Opinionated and ambitious, Karen is determined to bring change, making Waterloo Road a safe and vibrant place to learn. However, Karen's steely exterior masks a deeper fragility as she and her family wrestle with a recent tragedy. Karen's first challenge at the school arrives in the form of the Kirbys – sixth-former Jonah and 13-year-old genius Ruth – who have both been home-schooled by their father, Marcus. Marcus's ex-wife, Hannah, wants her children to experience mainstream schooling, but he has little faith in the state education system. While Jonah relishes the opportunity to make new friends and have new experiences, high-achiever Ruth feels she's got little to learn and soon takes matters into her own hands by running away. Meanwhile, Chris has slept with a girl called Jess, but when he arrives at the school he is horrified to learn that she is not only a Sixth Form student but Karen's daughter.

Cesca is drawn into a complicated situation that threatens to end her career. Meanwhile, Grantly's increasingly slovenly behaviour causes concern for Ruby, who is facing her own problems in the form of Janeece and John's blossoming friendship. Cesca's honest approach in her drugs-awareness class backfires when Sambuca comes to her asking for money to buy drugs. Sam's intentions are good, however; she wants to buy the drugs from Amy and Lauren and then throw them away in order to protect her friends. The ever-manipulative Amy doesn't trust Sam and hatches an elaborate plan to frame her. Facing exclusion, Sam relies on the honesty of her best friend, Lauren, while Cesca's reputation lies in tatters as Karen struggles to unravel the truth.

When Chris launches a trial scheme to equip the classrooms with CCTV there is uproar among both staff and pupils. Jonah is outraged when he learns that the staff room doesn't have a camera and, along with Ronan, hatches a plan to expose the hypocrisy of the scheme, unwittingly stumbling upon Jess's and Chris's secret in the process. Stunned at his discovery, he promptly hurts a bewildered Jess before launching himself at Chris in the middle of the corridor. As the pair desperately try and cover up the truth from Karen, Chris realises he must stop running from the truth. As Karen is faced with a massive decision, Marcus Kirby delivers a shocking further ultimatum to her. What will Karen do? Elsewhere, through the aid of Jonah and Ronan's planted CCTV camera in the staff room, Grantly's shocking home life is exposed to the year 11s, who taunt him about it in class, and push him to his wits end. Desperate for help, he seeks the aid of a former colleague, and must decide where Fleur's future lies.

It's the final day of term, with a charity fundraiser inspiring pupils into unique ideas. Grantly and Steph take Fleur to visit what they hope will be her new care home. However, a letter from the council to Grantly tells him that Fleur does not qualify for any sort of pension, and thus he must pay the full amount of her care, a fee which could leave him broke. Further anguish for Grantly awaits him at the school when Ruth Kirby, upon sitting an English A-Level mock, discovers that she and the rest of the A-Level students, have been taught the books set for the previous years exams, and have no knowledge of the current years set texts. The huge mistake Grantly leave his career hanging by a thread. Elsewhere, Charlie breaks some bad news upon Jess and Harry, further fuelling dislike from the pair, and a face from Karen's past returns.

The new term kicks off at Waterloo Road with new arrivals for both staff and students. In response to the boys' poor exam grades, Karen and Chris introduce a new single-sex teaching initiative, much to the disdain of staff and pupils. Especially unimpressed is the formidable new Head of Pastoral Care, Adanna Lawal, who rallies the rest of the staffroom into action against the segregation. New boy Kyle Stack (George Sampson) arrives at the school, complete with mother and Rottweiler, Manic. Kyle's first action at Waterloo Road is a violent clash with Finn Sharkey, leading him to the cooler. In there, he meets Bex and, whilst concerned at her distress, tries to comfort her, only to have her make allegations of sexual assault from him to Karen and Chris. In response to this, Kyle pushes the boundaries and demands Bex tell the truth. How far will Kyle go? Meanwhile, Ruby asks Janeece to be her classroom assistant in response to her continuous failure to control the pupils behaviour.

Harry's cry for attention veers out of control when he steals Karen's phone and causes turmoil among the staff of Waterloo Road. Meanwhile, Chris and Karen have their hands full with the school business initiative contest and Tom struggles to readjust during his first day back. When Karen and Harry come to blows over his falling grades, a disgruntled Harry gets his revenge by causing mischief with Karen's phone, sending incendiary emails to the other staff in the guise of his mum. As widespread anger and paranoia spread through the school, Karen is faced with an unexpected staffroom revolt. Sambuca Kelly returns to the school.

The secrecy surrounding Cesca's relationship with Jonah is finally lifted when she hands in her resignation to Karen. Elsewhere, Adanna unveils her latest plan to unite the sexes; Denzil conducts a life-threatening stunt; and creative differences threaten Ruby and Grantly's writing partnership. In a bid to finally go public with her relationship with Jonah, Cesca hands her notice in to a shocked Karen and Chris with a fabricated story about her father being sick. However, when a series of events arouses Chris's suspicions, he follows the pair and finally uncovers the truth, sending shockwaves through Waterloo Road and bringing the wrath of both Karen and Marcus.

It's the day of the Waterloo Road pantomime and there's drama both on and off-stage as Finn gets Kyle purposely kicked off the cast, Cesca and Jonah rush to get married and Denzil's latest stunt ends in tragedy. When Finn goads Kyle into a fight, he gets Kyle kicked off the cast and takes the leading role himself – much to Sambuca's disgust. The bickering continues between Finn and Sambuca and, as the script veers unexpectedly off course, Kyle and Denzil exact an explosive payback, sending Adanna's good intentions up in smoke and causing possible fatality for Finn.