Workaholic ad man Ted Kramer just got assigned to a big account at work, and he's stoked to tell his wife, Joanna, all about it. When he gets home, Ted finds out that Joanna has news of her own.
She's leaving him.
Ted doesn't believe Joanna at first, but when she makes it clear she's leaving behind their seven-year-old son, Billy, too, the situation pops into focus. Still, Ted thinks Joanna will be back soon. Surely, a mother can't leave her son.
Not so much.
Joanna's friend, Margaret, tells Ted that Joanna had been miserable in their marriage for years. That girl's gone for good.
Ted's not the domestic type, and he and Billy don't exactly have a natural rapport. Ted may be on 24/7 dad duty now, but he's still more wrapped up in work than anything—or anyone—else. And, horrors, he can't even make French toast.
Eight months pass. Ted and Billy have gotten their act together and solidly bonded. Everything's coming up Kramer—except at work. Ted shows up late for a client meeting. Then he misses a closing. Boss is not happy that Ted's priorities have shifted towards his son.
One day, we see Joanna watching Ted and Billy. We wonder if she's back from California for keeps—and if that means she has plans for Billy.
Joanna calls Ted, and they agree to meet at a restaurant. She says she's doing awesome since she moved to California. She's been seeing a therapist, and she doesn't feel like she's reduced to just being somebody's wife or mother anymore. Now, she's living in New York again. Also, she wants to take Billy back. Ted swats his wine glass at the wall and storms out of the restaurant. Then he lawyers up.
Shortly thereafter, Jim takes Ted out to lunch and fires him because he's done the unthinkable: put his son ahead of his work. Ted's lawyer, Shaunessy, tells Ted that if he's unemployed, he has zero chance of winning in court, and the hearing can't be delayed. Ted finds a lower-paying job.
In court, Ted's lawyers try to portray Joanna as neglectful and unstable, and her lawyers return the favor by painting Ted as a career loser who let his son fall of the climbing bars at the playground. Joanna and Ted, both decent folks at heart, aren't comfortable with their respective attorneys demonizing the other parent. Joanna's moved by all the testimony to Ted's newfound devotion to Billy, and Ted silently mouths "no" when his attorney asks Joanna if she's been a failure at her marriage.
A few days later, Ted meets with Shaunessy at a bar. They keep it quick: Ted lost. He can see Billy one night a week and every other weekend. Ted explains the new arrangement to Billy as best as he can. When Billy realizes that Ted won't be able to kiss him goodnight anymore, he gets really upset.
Joanna comes to pick up Billy and all his stuff. When the apartment's buzzer rings Joanna says she wants Ted to meet her in the lobby, alone.
Ted meets Joanna, and it's clear she's been crying. She tells Ted that she's had a change of heart and realizes that Billy's home is with Ted now. Then she asks if she can go up and see Billy.
Before the elevator doors close on Joanna, she asks Ted how she looks. "Terrific," he says. Looks like co-parenting may work out, after all.