The Seventh Doctor and Ace respond to an invitation to visit the mysterious Psychic Circus on the planet Segonax, despite Ace’s fear of clowns and reluctance to go. Other travellers have arrived on the wasteland world too – the fannish Whizz Kid; the motorcycling maniac Nord; tiresome bore and intergalactic explorer Captain Cook and his young female companion Mags, whom the Captain curiously refers to as a "unique specimen".
But all is not pleasant at the Circus. The Chief Clown travels around the planet's surface in a hearse with his team of mechanical clowns, using some unusual kites to search for and recapture an errant robot repairman named Bellboy, and his companion, Flower Child, who are trying to escape the circus. While hiding onboard a disused hippie bus, Flower Child is killed by something mysterious. It turns out to be a creepy robot conductor which also attacks the Doctor, Captain, Ace and Mags when they discover the bus. The Doctor disables the killer robot, while Ace finds one of Flower Child’s earrings, and pins it to her jacket as a keepsake. They venture on to the circus tent itself, but Ace hesitates when she hears Mags screaming inside, as she witnesses Bellboy being punished. The Doctor, however, doesn't hear a thing, and persuades her to go in.
Inside, they meet Morgana, the Circus ticket seller and fortune teller, who offers to read the Doctor's fortune, and reveals the Hanged Man Tarot card. The Doctor and Ace both join the audience, noticing that the only other audience members are a small family of three – father, mother, daughter – who observe the central stage with stoic disdain. The Ringmaster soon appears and invites the Doctor to join the entertainment. He agrees and is taken backstage where Nord, the Captain and Mags are also being kept. It appears that audience members are expected to become part of the show. Nord is duped into performing first, and when his act fails to amuse, he is obliterated.