It's a new term at Waterloo Road, and Michael Byrne is still recovering from his ordeal of getting run over. Stepping into his shoes at the school is Sian Diamond, who Michael has left in charge. However, it doesn't take long before trouble breaks out at the school. A local gang has begun 'tagging' the school with graffiti, and the teachers think that they could be on the verge of a gang problem. Chalky and some other staff think they should call Michael, but Sian says she is perfectly capable. Tariq is also back at school, and keen to stay out of trouble. However, he hasn't counted on some of his old acquaintances coming back this term. Both Kyle and Mason - members of the DSC gang - are joining Waterloo Road, and aren't going to make Tariq's life easy. Bowing to peer pressure, Tariq becomes involved with their chaos - including destroying Chalky's classroom. Mason tells Tariq to attack Finn. After convincing Finn to meet him after school to make up to him and go to the arcade, Tariq has set him up. The whole gang is waiting for him and they have a knife. Trudi - worried about her brother's motives for wanting to meet her boyfriend after school - gets Chalky to help. He arrives just in time with the police, who arrest Mason.
