In the third season, Michael Bluth finally realizes that it's his Uncle Oscar serving time in prison, not his father. Reluctant to spring Oscar due to the effect it may have on the family business, Michael decides that the only fair thing to do is to find his father and place him under house arrest. Yet once found, George Sr. insists he was tricked into working with the Iraqis, leaving Michael no choice but to investigate his father's outrageous claim. But it isn't until Michael and Buster go to Iraq on a rescue mission to save Gob that the depth of the devious plot is revealed — and Michael learns which family member is the real brains behind all the madness.
Michael learns that it's actually George Sr.'s twin brother Oscar serving time in prison, not George. After getting a tip from Barry, Michael heads to Reno to find George, but that costs him a camping trip he promised his son.
Investigating his father's claim that a British group set him up, Michael goes to "Wee Britain" and is smitten with a beautiful woman named Rita. Lindsay attempts to seduce the new family attorney, and Gob goes to extremes to avoid his newly discovered son.
George Sr. is placed under house arrest by the family's new attorney Bob Loblaw, and finds that it's not exactly a walk in the park. Michael sets up his first date with Rita, but Rita has an unfortunate encounter with the family beforehand.
To prove he's a man to Rita, Michael and his nephew Steve Holt compete in the Church And State Fair's annual triathlon. George Sr. tries to scare some at-risk youth, and Tobias tries to help George-Michael's girlfriend Ann to compete in the fairs' "inner beauty" pageant.
Michael must deal with a huge mole problem in order to salvage a major real estate deal with Japanese investors. In an effort to help Michael, Gob and Buster team up with George Sr.'s surrogate, Larry, to devise a plan and save the deal, but their plan falls apart in a big way. Meanwhile, Tobias mistakes a CIA agent for a CAA agent and inadvertently betrays the family, and Michael makes Rita a proposal she can't refuse. Frankie Muniz makes a cameo as himself.
After Michael announces he's marrying Rita, George Sr. worries that she's after the family's money. But when Rita's Uncle Trevor tries to stop the wedding by revealing some surprising information about Rita, Michael must decide if he wants to walk down the aisle.
The family plans their annual fund raiser, and they actually have a cause this time. Tobias is ailing due to his transplanted hair plugs, which appear to be rejecting him. Lindsay uses the illness as her ticket back into high society, and Michael learns of the prison warden's true intentions with his mother after reading the warden's screenplay.
Michael is tired of his father always having Gob compete with him, so Michael gets Gob his own banana stand franchise, only to find that Gob has set it up 20 feet from the old one. After the two compete, they decide to teach their father an elaborate lesson, and Buster refuses to use his handicap to scare kids. Meanwhile, Maeby uses Lucille's surgery in a horror film.
George Sr. suggests a last-ditch effort to save the family by holding a fund raiser to raise money to pay their legal expenses. Michael suggests to Lindsay that she take over the house work, and he sends George-Michael to an expensive boarding school. Meanwhile, Maeby has trouble with a snowboarding film and Tobias tries to be a "discipline daddy".
George, Sr. hires a new attorney who asks the Bluths to participate in a mock trial to help prepare them for the real thing. The attorney gets actor Judge Reinhold to preside over the mock case. Meanwhile, Buster fakes a coma to get out of testifying, and George Michael and Maeby participate in a mock wedding to entertain hospital patients. Back at the office, Michael discovers that he may have a long-lost sister named Nellie Bluth.
In an effort to get to the bottom of things, Michael tracks Nellie down and hires her as a consultant for the Bluth Co. Unfortunately, Michael discovers Nellie's hands-on approach is more than he bargained for.
Gob goes to Iraq to perform his Christian magic act on the USO tour and ends up incarcerated. Michael learns George, Sr. sent Gob to Iraq to burn down the model home he built there, so Michael and Buster fly to Iraq to spring their brother from prison.
After returning home from Iraq, George Sr. is finally cleared of all charges, and Michael is relieved to be the head of a successful company for a change. The real brains behind the madness is revealed, and just as the family begins to celebrate their victory, a whole new set of problems emerge.