The film begins with Gordon Cole calling Agent Chester Desmond about the mysterious murder of Teresa Banks. He then is introduced to his new partner, Sam Stanley. They then receive clues fom Lil the dancer. The murder is coded as a "Blue Rose Case". They go to the sheriff's department where the body of Teresa Banks is kept in the morgue. Agent Desmond forces them to let Chester and Stanley see the body; as they inspect it, they realize that her ring is missing. Stanley realizes that there is a letter "T" placed under her fingernail. The two go to the diner where she worked, and discover the clue that Teresa's left arm has been weird lately. Later, the two go to Fat Trout Trailer Park where Teresa stayed, and the owner Carl helps Chester and Sam find the trailer. Suddenly, he becomes bewildered by an electric pole. Teresa Bank's body is sent back to Portland, and as Agent Desmond he returns to the trailer park, a beeping noise is heard. He looks under the Chalfont/Tremond trailer, picks up Teresa's ring, and vanishes.
Meanwhile, in Philadelphia, Agent Dale Cooper informs Gordon about the dream he saw where long lost Agent Phillip Jeffries re-appears. As Cooper looks at a security camera, Agent Jeffries appears out of nowhere, like in Cooper's dream. Agent Jeffries insanely tells Gordon that he was in a nightmare. While he explains all those things, we see images of the Man From Another Place, BOB and Mrs. Chalfont and her grandson in a room. As the Black Lodge appears, they go in. As Jeffries is explaining, he disappears into thin air. Due to Chester's disappearance, Cooper is sent to investigate. He goes to the trailer park to find a missing trailer (owned by Mrs. Chalfont and her grandson), seeing the words "Let's Rock" (words said by the Man From Another Place in the 25 years later dream from the series) on Chester's car's windshield. The clues to Teresa Banks' murder lead to a dead end.
One year later in Twin Peaks, Laura Palmer and Donna Hayward go to school, where Laura does drugs and makes out with James Hurley. After school, Laura talks with Donna about the difference between Bobby Briggs and James Hurley. As Laura takes out her secret diary, she realizes that there are pages missing. She goes to Harold Smith's house, and tells him about the torn out pages, saying that BOB did it and getting mad at Harold for not believing in BOB. Laura decides to let Harold hold on to her secret diary. Meanwhile, Agent Cooper tells Agent Rosenfield that he believes the killer will strike again.
On her Meals on Wheels round, Laura sees Mrs. Chalfont and her grandson. Mrs Chalfont gives Laura a painting and informs Laura that the "man behind the mask" is in Laura's room. Laura lets Shelly deliver the Meals on Wheels and returns home, where she seems to be alone, but as she goes inside her room she sees BOB. As she goes outside, Leland, her father, comes out. Laura refuses the facts. When the Palmer family is about to eat, Leland starts insanely complain that Laura didn't wash her hands and about the necklace she got from James. About to go to bed, she hangs the painting she got from Mrs. Chalfont.
She dreams about Cooper entering the Black Lodge and the Man From Another Place telling Cooper that he sounds like a beeping noise (the noise heard when Chester Desmond entered the Trailer Park). He shows Cooper the ring that Teresa Banks had, and Cooper tells Laura not to take the ring. She wakes up to find a bloody Annie Blackburn next to her in bed. She tells her that Cooper is trapped in the Black Lodge and he can't get out. She then disappears and Laura finds the ring in her hand. She then re-awakes. Meanwhile, Bobby, Leo and Jacques Renault are talking about drug scores.
Laura is ready to go to the Bang Bang Bar and Donna wants to come, but Laura doesn't let her. As Laura is about to go in, she encounters the Log Lady and she tells her something mysterious. Inside the bar, Jacques introduces Laura to two rednecks. They're about to go to One Eyed Jack to have sex, but Donna appears and wants to come too; impressed by her kiss, they let her. At One Eyed Jack's, Laura has sex then discusses Teresa Banks's murder with Ronette Pulaski. Laura witnesses Donna have sex then takes her home. The next morning, Donna wakes up and Laura tells Donna that she doesn't want her to become like Laura.
