On the set of the film "Massacre at Sioux Falls," a Native American extra waits in the cold for star Ronald Reagan to show up for filming. A crew member makes awkward, vaguely racist small talk with the Native American to pass the time. The extra asks about Regan, and the crew member says Reagan is a class act.
We see interspersed scenes of news contemporary news coverage from 1979 with Dodd Gerhardt waiting with his associate for his brother Rye to show up. Rye finally shows up, telling his brother that he doesn't have the money he collected yet, because he needed it for something for himself. Dodd chastises him, reminding Rye that everyone collects for the family.
Dodd returns to the Gerhardt house. The Gerhardt matriarch is showing their father Otto the accounting books. She points out that the money is suspiciously light. Bear mentions that there might be another crew moving in on them. Dodd assures them he's taking care of it. Otto works himself up considering the "south nowhere" crew moving in on his territory when he is the iron fist. Otto suddenly has a stroke and slumps over.
Rye drives over to a typewriter store. He has a chat with the salesman, who tries to persuade him that a new type of typewriter will make them rich. He tells Rye that he just needs Rye's family to forgot the gambling money debts that he owes to the Gerhardt family. He also needs Rye to "talk" to a Judge and have her unfreeze the salesman's accounts.
Rye follows the Judge by car to Waffle Hut in Luverne, Minnesota. He does cocaine before going to confront her and remembers his brother mocking him earlier. He is twitchy and snaps at the waitress. When he finally works himself up enough to confront the Judge, she is unmoved by his intimidation. She tells him the story of Job being tested by the Devil, asking Rye how he expects to change her mind when the Devil couldn't change Job's.
She also mocks him for being dim, finally spraying bug spray in his eyes to get him to leave her alone. Rye finally snaps, shooting her, along with the cook (who tries to intervene) and the waitress. The Judge manages to stab him before being shot dead by Rye.
Rye takes the money from the cash register before noticing that the waitress is still alive and managed to hobble her way outside, attempting to escape. He manages to shoot her dead and leaves her body out in the snow. He makes his way towards the road in a stupor, where he spots lights that sort of look like an aircraft or possibly a UFO. While distracted, he is hit by a car. The driver pulls away with Rye still hanging out on the hood.
Lou Solverson reads a bedtime story to young Molly. He is interrupted by his wife Betsy, who tells him he has a call from "the shop." She mentions that the caller told her there was a murder. He asks his wife how "the thing" she had today went and how she is feeling. She replies that it went OK. Lou leaves to go visit the crime scene.
At the diner, the rig driver who called in the crime scene shows Lou to the body of the waitress. Lou and Hank, a local sheriff and Lou's father-in-law, discuss the crime scene. Hank recognizes the cook as a legendary local athlete but neither man recognizes the judge. Hank asks Lou how Betsy is doing, attempting to give him an opening to talk about his feelings about the situation.
Lou theorizes that the killer followed the waitress out to make sure she was dead, and they continue on outside where they notice that there are one too many cars based on the number of victims. They also spot the skid marks from the hit and run car. Lou mentions it is unclear why the killer didn't take his own car. Hank spots a shoe in the tree above the skid marks.
Ed leaves his assistant butcher job at the butcher shop for the night, where the butcher gives him a few chops to take home that were already paid for.
Lou goes to meet up with a few friends at bingo. His friends include Karl Weathers, a conspiracy theorist. Lou mentions that they were Vietnam War veterans. He also brings up the three dead at the Waffle Hut. Karl brings up the Kennedy assassinations and Watergate, implying that the diner murders were part of something bigger. Lou mentions he should get home and that his wife Betsy had her chemo that day. Karl expresses dismay that Betsy is dealing with cancer.
Ed returns home to his wife Peggy, who made him Hamburger Helper and tater tots. She is notably uptight with them, not allowing him to sit at a chair where she's stacked her things. They sit at the table to pray before eating.
Lou returns home to find Betsy cleaning up. Betsy mentions a theory on the case about the shooter having an accomplice and a getaway car, and Lou notes that her father must have called her before he got home.
At the Blomquist home, Peggy tells Ed about the Lifespring seminar that she is excited to be attending soon. She mentions it helping her to overcome the things that are keeping her life from "working." Ed is alarmed at that, and requests reassurance that the two of them are working. Ed discusses his ambitions to eventually take over the butcher shop, and the idea that she might one day take over the salon. Peggy doesn't look too pleased with that option for their future and doesn't express much confidence in Ed's likelihood of taking over the shop.
Ed brings up having a family with her, but Peggy evades the idea. They are interrupted by a loud crashing sound coming from the garage. Peggy tries to distract Ed to prevent him from going to look, but he goes anyway and sees the car with the broken windshield and blood spattered hood. She attempts to get Ed to leave the garage, but a severely injured Rye ends up attacking Ed and trying to stab him. Ed stabs Rye with a shovel in self-defense.
Ed is alarmed and accidentally hits Peggy in the face. Peggy explains that she thought the man she hit was dead. She recalls hitting him and driving home via the backroads with Rye's body hanging out the windshield. Ed asks Peggy why she didn't call the police or go to the hospital. She tells him that she panicked. She makes excuses. She first tries to convince Ed that they can run and go to California, starting again out there, but Ed doesn't want to do that. She convinces Ed that they need to clean it up and pretend it didn't happen, in order to protect their plans for the future. Ed agrees to clean it up.
Lou and Betsy go to bed for the night.
At the Gerhardt house, Floyd watches over her inert husband Otto, post-stroke.
Ed and Peggy store Rye's body in their freezer.
Joe Bulo makes a presentation called the "Kansas City Northern Expansion Strategy 1979-1980" to the mafia and in particular his boss, whose face remains unseen. He notes that the main component of their expansion relies on absorbing or buying out the Gerhardt family syndicate in Fargo, ND. The Gerhardts control trucking and distribution throughout the northern midwest region. Bulo informs the group that Otto had a stroke earlier. They are not sure who is currently in charge, but Bulo implies that the power struggle between Otto's three sons may leave the group an opening to make a move to take over the Gerhardt operations. If the family resists, Bulo intends to liquidate. The unseen boss approves the plan.