When Geordi, Deanna, and Wes come to Data's lab a few weeks after a cybernetics conference, he introduces them to Lal, his child. When Picard hears of this, he becomes concerned about what Starfleet will think. When he reminds Data of the awesome responsibility he's taken on, Data replies that it's no different than the responsibility anyone takes on when becoming a parent. Later, Lal selects a sex and appearance from the holodeck, which its body is then built into. When Lal returns, resembling a human female (with realistic skin and eyes), Deanna says, "Congratulations, Data- it's a girl."

As Data begins teaching Lal about humanity and the world, he finds he is often relearning the experience himself. After Lal assimilates curiosity correctly and responds with many, many questions, Data decides to send her to school. Meanwhile, Admiral Haftel of the Daystrom Institute wants Lal transferred down to the Institute where she will be "safe", but without Data. Picard tells him he thinks that would be a bad idea, and Haftel consults with Starfleet Command. Meanwhile, Data finds that school is not working out so well- the other children are frightened of Lal and laugh at her. He goes to Bev for advice, but when she suggests love and attention, he claims to be incapable of giving her love.

Later, Picard is wakened by a transmission from Haftel- he is en route to review Lal's development, and if not satisfied, he will take her back with him. Later still, Data completes the final transfers from his brain to hers (which is how he created her brain in the first place), and leaves her in 10-Forward to learn about observing humanity from Guinan. (While there, Lal exceeds Data's abilities by using a contraction.) Later, after Lal's tested her observations about flirting (on Riker, no less), she laments to him that she cannot feel emotions. (Data tells her the struggle for humanity is what's most important.)

When Haftel arrives, he seems already determined to take Lal, regardless of the facts. He dismisses Picard's attitude as "sentimental" and claims Lal needs proper monitoring. When he talks to Lal, she says she wishes to stay, and when excused, goes to Troi, claiming she is "scared". Troi is stunned to sense that Lal truly is scared, and follows Lal back to the lab.

Haftel talks to Picard and Data, and claims there is a time when every parent must give up his or her child, and ignores Picard's arguments. He orders Data to release Lal to him, but Picard belays it, prepared to take this up to Starfleet Command himself. The argument is abruptly broken when Troi calls about Lal, and all three hurry to Data's lab. Data finds a major malfunction has occurred, and he and Haftel begin trying to save her. Sadly, they cannot, and Lal "dies" in Data's arms after telling him she loves him. Data returns to the bridge, having downloaded her knowledge back into himself, so that she will not be lost.