Season Three of The Wire opens with the demolition of Baltimore's notorious Franklin Terrace towers, the home base of Avon Barksdale's (Wood Harris) crew, currently under the supervision of Stringer Bell (Idris Elba). Rather than worry about expanding his control, through violence and intimidation, of the corners of West Baltimore, Stringer explains to his lieutenants that he plans to make money by offering the other gangs in on their New York drug supply, and sharing the corners with them. Lieutenant Daniels (Lance Reddick) and his unit are doing surveillance on Cheese (Method Man), one of Proposition Joe's dealers, and begin to realize that the phones that the street dealers use never reach the higher-ups in the organization. They have a wire up on one talkative dealer, who happens to be Prop Joe's nephew, and they decide to bust someone higher on the food chain in hopes that Prop Joe will promote the talker. "What makes you think they'll promote the wrong man?" asks Commissioner Burrell (Frankie Faison), to which Daniels responds, "We do it all the time." Daniels also finds out that Mayor Royce (Glynn Turman) is holding up his promotion because his wife, Marla (Maria Broom) is planning to run for the city council against one of the mayor's cronies. An ambitious councilman, Tommy Carcetti (Aidan Gillen) notices an uptick in violent crimes in the city, and decides to go after the mayor, inviting the media to watch him criticize Burrell at a hearing. This leads Burrell and Rawls to pressure their majors, including Bunny Colvin (Robert Wisdom) who is approaching his thirty year pension, to bring the murder rate down. Cutty (Chad L. Coleman), a former drug soldier, gets out of prison after fourteen years, and gets a handout from Avon, who plans to get out soon himself.

Omar (Michael K. Williams) and his crew continue to plague Avon's (Wood Harris) crew, robbing another stash, prompting Stringer (Idris Elba) to double the muscle at all his stash houses. Stringer's lieutenants make their sales pitch to the other gangs, but Bodie (J.D. Williams) has a difficult time convincing one strong-minded independent dealer, Marlo (Jamie Hector) of their common cause. Carcetti (Aidan Gillen) gets Stan Valchek (Al Brown) to help him pressure Burrell (Frankie Faison) to cooperate with him. Burrell is loath to go behind the mayor's back, but reaches what seems to be a mutually beneficial agreement with Carcetti. McNulty (Dominic West) investigates D'Angelo Barksdale's apparent suicide in prison, and visits Donette (Shamyl Brown) to tell her that D'Angelo might have been murdered. Cutty (Chad L. Coleman) gives straight life a try, getting day work as a landscaper, and finds it difficult. Cheese's (Method Man) loss at a dogfight leads to murder. It also causes confusion among Daniels' (Lance Reddick) team about what they're hearing on the wire. Ronnie (Deirdre Lovejoy) realizes that Daniels is no longer living with his wife, and pursues him. Kima (Sonja Sohn) is having a difficult time adjusting to domestic life with a new baby. During an undercover hand-to-hand buy and bust in the Western District, one of the officers under Bunny's (Robert Wisdom) command is shot, leading him to further question the good he's done over the course of his long law enforcement career.

Omar (Michael K. Williams) hits another Barksdale stash house, but this time, they're better prepared for him, and in the ensuing gun battle, a member of each crew is killed. Bunk (Wendell Pierce) catches the double homicide, and quickly realizes that Omar was involved, but he's also under tremendous pressure to complete an impossible task. For PR purposes, he's been instructed to recover Officer Dozerman's gun, which was stolen after Dozerman was shot. Carcetti (Aidan Gillen) continues to put pressure on the mayor, going to the press with the news that the next police academy class has been postponed for budgetary reasons. An irate Royce (Glynn Turman) orders Burrell (Frankie Faison) to take responsibility for the postponement, angering the commissioner. Prop Joe (Robert F. Chew) warns Stringer (Idris Elba) that the police are listening to their phone conversations. He also tells Stringer "what kills more police than bullets and liquor." It's boredom. "Keep it boring, String," he advises. With the wire dead, Daniels (Lance Reddick) assigns his team a new target in East Baltimore. McNulty (Dominic West) is still obsessed with Stringer, however, and continues to investigate D'Angelo's death. Bodie's (J.D. Williams) crew continues to encroach on one of Marlo's (Jamie Hector) corners, leading to violence. Cutty (Chad L. Coleman) visits an ex-girlfriend who tries to hook him up with a job opportunity. Bunny Colvin (Robert Wisdom), under increasing pressure to reduce felonies in his district, devises a radical plan to make some abandoned blocks in the neighborhood an enforcement-free zone, and coerce the dealers to move there.

Herc (Dominick Lombardozzi) and Carver (Seth Gilliam) try to convince the local corner boys to relocate, as per Colvin's (Robert Wisdom) orders. "Vincent Street is your Amsterdam in Baltimore," Herc tells them, but they're not interested, so Colvin has them rounded up and brought to a local school gym so that he can tell them about his plan. They're unresponsive. Kima (Sonja Sohn) and McNulty (Dominic West) continue to disobey Daniels' (Lance Reddick) orders, hiring Bubbles (Andre Royo) to look around and tell them what happened to Avon's (Wood Harris) people after the towers came down. Bubs tells them about the strangely cooperative mood on the street, and about how the dealers are all using disposable cell phones, called "burners," these days. McNulty also tracks Stringer (Idris Elba) on his own, and learns that Stringer is cleaning up his act, at least on the surface, through his real estate dealings. Lester (Clarke Peters) attacks McNulty for disrespecting Daniels. "This may not be perfect," he tells McNulty, "but it's a chance to be police." Carcetti (Aidan Gillen) is considering a run for mayor. He meets with an old acquaintance, Terri D'Agostino (Brandy Burre), who is now a successful political consultant. "You're the wrong color," she tells Carcetti. "You're not electable." Carcetti is not deterred. Cutty (Chad L. Coleman), increasingly frustrated with straight life, pays a visit to Slim Charles (Anwan Glover) looking for work. McNulty pays a late night drunken visit to Rhonda (Deirdre Lovejoy) and finds that she's otherwise engaged. Stringer finally looks in on Donette (Shamyl Brown), who tells him about McNulty's stated suspicion that D'Angelo was murdered.

Bubbles (Andre Royo) has been working as a CI, and Johnny (Leo Fitzpatrick) is not happy about it. He convinces Bubbles to pull a small-time scam. McNulty (Dominic West) get fed up watching Stringer (Idris Elba) and decides to confront the man directly. Stringer tries to sell him a condo, leading McNulty to lament, "You disappointed me, String. I had such f***ing high hopes for us." Later, Kima (Sonja Sohn), watching Marlo (Jamie Hector), makes a discovery that will bring joy to McNulty. Colvin (Robert Wisdom), having failed to get the corner boys to move of their own volition, decides to go over their heads, and eventually has to go to Daniels' (Lance Reddick) unit to find out who the drug lieutenants are in his district. Colvin explains to them that police will only be in the designated locations to prevent violence, and will not arrest them for dealing. He also threatens to crush those who choose to stay on the corners. The cops even end up rounding up customers for the dealers, but Marlo, for one, refuses to play along. Just before Avon (Wood Harris) is released on parole, Baltimore's drug kingpins meet and agree to Stringer's plan to team up to get a better deal from his New York suppliers. Bunk (Wendell Pierce) is developing leads on the double homicide involving Omar (Michael K. Williams), but his superiors again force him to focus on tracking down the missing police weapon. Carcetti (Aidan Gillen) learns about a state's witness who was murdered, and quietly makes his displeasure known to Royce (Glynn Turman), who promises swift action to prevent further such incidents. McNulty meets D'Agostino (Brandy Burre) at an event for his son's school, and the two hit it off, after a fashion.

Stringer's (Idris Elba) "legitimate" real estate associates are soaking him for bribe after bribe. Colvin's (Robert Wisdom) "provisional legalization" program, which the hoppers call "Hamsterdam," seems to be working. Colvin orders his troops to spare no effort in deterring dealers from staying on their corners, and they go wild with it. Avon (Wood Harris), fresh out of jail, is upset to hear about his crew's run-ins with Marlo (Jamie Hector). He wants to take a run at him, but Stringer wants to keep trying to talk to Marlo. Stringer wants to worry about the wholesale business of supply and money laundering, not the petty retail squabbles of who runs what corners. Kima (Sonja Sohn) and McNulty (Dominic West) tell Daniels (Lance Reddick) about Stringer's meeting with Marlo, but he's tells them, "This unit is about the bodies," and the Western District has been quiet. Avon has Cutty (Chad L. Coleman) and Slim Charles (Anwan Glover) take a run at Marlo. But Barksdale's crew doesn't have the muscle it once did. Bubbles (Andre Royo) tells Kima about the bodies dropping, but Daniels gets fed up with McNulty and Kima usurping his authority, and refuses to reassign the unit, so Kima suggests that McNulty go around him. Carcetti (Aidan Gillen) and D'Agostino (Brandy Burre) think if there's a black candidate running against Royce (Glynn Turman) in the primary to split the black vote, and Carcetti can get the support of someone like Odell Watkins (Frederick Strother), he might have a chance. Bunk (Wendell Pierce) gets permission to work his murder case, and arranges a face-to-face meeting with Omar (Michael K. Williams), taking the opportunity to lecture the man about his effect on the community. Donette (Shamyl Brown) talks to Brianna (Michael Hyatt) about her relationship with Stringer, and about McNulty's visit.

Daniels (Lance Reddick) gives the unit their new targets, Stringer (Idris Elba) and Marlo (Jamie Hector). He's furious when McNulty (Dominic West) confirms that he went to Colvin (Robert Wisdom). "When the cuffs go on Stringer," Daniels tells McNulty, "you need to find a new home." Because crime is going down everywhere in his district except near the designated drug zones, Colvin is able to redeploy his forces to focus on the high crime areas. In "Hamsterdam," Carver (Seth Gilliam) realizes that since the dealers no longer need lookouts or runners, the little kids that worked for them have been cut loose. He institutes a "tax" on the dealers to take care of them. Cutty (Chad L. Coleman) is back to doing yard work, and seeks further help in dealing with his new life. Omar (Michael K. Williams), genuinely dismayed by his talk with Bunk (Wendell Pierce), decides to do the cop a huge favor. Kima's (Sonja Sohn) late night drinking and carousing cause further deterioration in her relationship with Cheryl (Melanie Nicholls-King). Marlo waits for Avon's (Wood Harris) crew to retake the abandoned corners before his own crew retaliates. Bernard (Melvin Jackson, Jr.), who goes to Virginia to buy burners for Avon's crew, is pressured by his impatient girlfriend, Squeak (Mia Arnice Chambers), to be a lot less careful in his work. The wiretap unit begins to figure out how the dealers' cell network works, but Lester (Clarke Peters) points out that by the time they could get a wiretap up, the phones would be discarded. In an effort to obtain an active burner, the wiretap unit busts Bodie (J.D. Williams) and his crew with a G-pack on their way to Hamsterdam, causing an awkward situation for Colvin. Herc (Dominick Lombardozzi) also gives the wiretap unit some dismaying news.

Stringer's frustrations with construction hassles are assuaged by Sen. Davis (Isiah Whitlock Jr.); Avon turns his attention to Omar; Brianna meets with McNulty; Prez's sleuthing provides concrete evidence for the detail; Cutty imagines a different career path.

Carcetti learns that a colleague is planning to run for mayor; Bubbles wears a wire in Amsterdam; Proposition Joe intervenes in the Avon-Marlo dispute; Cutty finds an unlikely ally in his quest to open a gym; gun violence disrupts a longstanding Sunday truce.