The school year ends, and Anne enjoys the summer vacation until a risky dare game with her friends goes wrong: Josie Pye challenges Anne to balance on the ridge of the Barry house’s roof. Anne falls and breaks her ankle, confining her to bed for weeks. Despite the pain, she uses her imagination to overcome boredom and receives support from Diana’s daily visits as well as gifts from her classmates.

During her recovery, the new teacher, Miss Stacy, is introduced, who captivates with modern methods like nature explorations and poetry recitations. She organizes a Christmas concert to fund a school flag. Anne is chosen as the main reciter and practices diligently, while Matthew secretly gets her a dress with the coveted puffed sleeves—a gesture that deeply moves Anne.

The concert becomes a triumphant success: Anne shines with her recitation, and Diana’s singing is enthusiastically celebrated. In the background, Anne’s academic ambition is hinted at as Marilla and Matthew ponder her future—possibly attending Queen’s Academy. The episode ends with a reconciliatory moment between Anne and Gilbert Blythe, who secretly picks up a rose she wore, while her friendship with Diana emerges strengthened from the challenges.