The main narrative of the fourth season is driven by Don Draper's identity crisis after the dissolution of his marriage to Betty. As Don falls deeper into existential despair, his alcoholism worsens and he begins regularly meeting with prostitutes. Don travels to California to see Anna and meets her niece, Stephanie, who tearfully tells Don that Anna is dying of cancer, a fact her family has hidden from Anna thus far. Don, unable to spend time with Anna knowing she is going to die, tells her he will return to California soon with his kids, knowing that it's a lie. Meanwhile, Sally struggles to cope with her parents' divorce, and Betty and Henry send her to a child psychologist to address Sally's erratic behavior. The psychologist offers comfort to Sally, but additionally spends a significant amount of time analyzing Betty.
Pete and Peggy continue down different cultural paths; Pete accepts fatherhood when Trudy gives birth to a baby girl, while Peggy makes friends with a group of beatniks, including Abe, a liberal writer whom she starts to date. Peggy's relationship with Don becomes frayed after Don wins a prestigious award for a commercial whose success largely depended on Peggy. The tension comes to a head when Don forces Peggy to stay late in the office, causing her to miss her own surprise birthday party. Nevertheless, the two reconcile and have an intimate discussion about their lives. That night, Don falls asleep in Peggy's lap and experiences a vision of Anna carrying a suitcase. Having received an urgent message from Stephanie the day prior, Don returns the call after waking up and discovers that Anna has died. Peggy comforts Don, and the two hold hands in an act of friendship.
After Anna's death, Don cuts down on his drinking and becomes increasingly introspective. He asks Faye Miller, a consultant at Sterling Cooper Draper Pryce (SCDP), out on a formal date. Around the same time, Roger and Joan have sex after getting mugged in a poor neighborhood. Joan becomes pregnant and decides to pass the child off as Greg's rather than take Roger's money for an abortion.
At SCDP, Roger loses the Lucky Strike account, putting the financial security of the entire company in jeopardy. When SCDP lands a contract with North American Aviation, FBI agents come to the Francis home for a routine security clearance. Don is rattled and forces Pete to drop the aforementioned client, while Faye advises Don to come clean about his past to the authorities rather than continue living in fear. Don later discovers that his former mistress, Midge Daniels, is in the throes of heroin addiction. In order to put a positive spin on being dropped from Lucky Strike (and deeply rattled by Midge's inner destruction), Don places a full-page ad in The New York Times proclaiming that SCDP will no longer do business with Big Tobacco. The sensational move does not go over well with their partners, except Don's assistant Megan, who admires it.