Ally McBeal, attractive recent graduate from Harvard Law School, is harassed at work by a senior associate. She complains to the powers that be but ends up losing her job. By chance, Ally bumps into former classmate Richard Fish, who invites her to join his new firm. Ally hesitantly accepts and receives the shock of her life on the first day: her childhood sweetheart Billy Thomas is an associate at the firm.
Ally is dismayed to be assigned as a litigator for humiliated firm partner John Cage. On top of that, Fish invites Ally to dinner with potential client Ronald Cheanie without telling her their outing is actually a double date. Ally's fury over being set up quickly cools when she sees Cheanie kissing Fish's girlfriend in the restaurant bathroom.
Ally senses Cheanie is hiding something when he avoids kissing her after their first official date. In the office, Ally helps Georgia with an age discrimination case where the opposing litigator happens to be Billings, the man Ally sued for sexual harassment at her old firm. Ally tries to be taken off the case but Fish admonishes her for putting her personal life before the interests of the firm.
Ally is asked to be a pallbearer at the funeral of her ex-law professor who also happens to be her ex-lover. The widow, thinking her husband was a great mentor for Ally, asks her to give the eulogy. Ally's reluctance leads Billy to find out the truth about her reasons for avoiding the funeral. Billy offers his support to Ally, which unnerves both Georgia and Cheanie.
Ally is arrested for assault and attempted shoplifting after an altercation with a hostile woman at a grocery store. Renee bails her out but word spreads quickly around the office. Ally is brought before the State Bar Review Board where her unconventional past and eccentric behavior is held up for scrutiny.
Ally agrees to help defend a friend of Whipper's who is being charged with solicitation. Serving second chair to John Cage on the case proves to be a strange and unusual experience when his idiosyncrasies become increasingly difficult to ignore. To top it all off, an obese attorney on a different case passes out in courtroom hallway and Ally has to give him mouth-to-mouth resuscitation.
Billy and Georgia face a crisis of confidence in their marriage while Ally, Cage, and Georgia tackle a ridiculous divorce case. Elaine threatens to sue the firm if Fish does not meet her demands for a better working environment.
Attorney Caroline Poop returns to represent a beautiful delivery woman who is suing Fish and Cage for same-sex sexual harassment. Ally and Renée make a bet over who can tell a better dirty joke at the bar.
Ally is forced to defend a young prostitute up on her third solicitation charge. Much to Ally's surprise, her client is a transgender woman named Stephanie. As Ally grows closer to Stephanie, she begins to realize the true dangers her client faces as a transgender prostitute. Fish, meanwhile, sues his uncle's church for discrimination because of their refusal to hold a service reflecting his uncle's prejudice against short people.
Three successful, intelligent adults approach Judge Whipper Cone about legal representation in their quest to legally obtain a three-way marriage. Fish assigns Ally and Cage to the case, despite Ally's opposition. Holiday Blues permeate the office, causing several complications for the couples in the firm.