Although reports that the war is almost over reach the camp with increasing frequency, the 4077th is still full with refugees and prisoners of war. Fresh casualties pour in as both sides try to gain ground before the armistice. A deeply troubled Hawkeye has been sent away to the psychiatric hospital where Dr. Sidney Freedman tries to help him find the cause of his breakdown, which is associated with a tragic incident on a trip back from R&R at the beach.
Other members of the unit are coping with the final days of war, and making plans to get out: Hot Lips' 'father is trying to find her a glamorous Army post; B.J. is determined to make it back for his daughter's birthday; Charles wants a plum appointment at a Boston hospital; Klinger worries about Soon-Lee's attempts to find her parents. A runaway Army tank that crashes into the compound and destroys the half-built latrine interrupts the normal business of the camp.
This has two results. First, Charles wanders off to relieve himself and stumbles on a group of Chinese musicians. They surrender and come back with him to the camp. Second, the enemy spots the tank and begins to shell the base. Father Mulcahy bravely ventures out under fire to release the POWs, a shell explodes near him, and he suffers a mild concussion. When B.J. examines him, he detects a hearing loss that Father Mulcahy begs him to keep from the rest of the company.
The barrage continues as the unit fails to move the tank out. Hawkeye returns to the 4077th and is called straight into the O.R. He is urgently needed because B.J. has received orders permitting him to go home, much to Hawkeye's chagrin.
Charles learns that he has been appointed to Boston hospital but quarrels violently with Hot Lips on discovering that she has pulled strings for him. He consoles himself by teaching the Chinese musicians a little touch of Mozart. Klinger, meanwhile, has brought back a reluctant Soon-Li to the safety of the camp, although she is still determined to find her parents. He is obviously in love.
The pressure on the company is temporarily relieved when Hawkeye, who has coped successfully with his return to surgery, drives the tank into the 4077th's trash dump, but only temporarily. Fires started by incendiary bombs in the surrounding woods are visible from the camp and Colonel Potter orders evacuation proceedings: "Bug out!!"
The Colonel's desperate plea for a relief surgeon is answered unexpectedly by the return of B.J., who was already one-third of the way home when the Army recalled him to fulfill the Colonel's staff request- B.J.'s travel orders had been rescinded shortly after he departed the camp and he had been tracked down on Guam and sent back. He misses his daughter's birthday, but the company hosts a birthday party for an orphan with B.J. as the guest of honor. Klinger proposes marriage and is accepted by Soon-Li. He is overjoyed. Charles, however, is not so happy when he loses his "orchestra" to a relocation center.
The end of the war is only hours away, but the casualties keep coming in - among them Charles' flutist. Finally, the surgical teams learn of the immediate ceasefire as they operate on a group of desperately wounded soldiers and civilians. The war is over.
At the noisy, joyful camp party that night, members of the company talk about their lives after the war: Colonel Potter looks forward to becoming a semi-retired country doctor; Hot Lips declares she has opted for the States and a big city hospital; Klinger announces his engagement and says that he is staying in Korea to help find Soon-Li's parents - to everyone's amusement; Charles is still going to Boston, despite Hot Lips' "meddling"; B.J., of course, wants to go home, yet refuses to actually say "goodbye" to the others; And Hawkeye? Perhaps, after all, he will not be going to the big city surgical post that he always dreamed of...
After Klinger and Soon-Li marry and leave the camp in traditional Korean the other members of the company depart one by one. By now, the camp is a ghost town. Father Mulcahy leaves to start a new life ministering to the deaf. Hot Lips is kissed and hugged. Even her disagreement with Charles is reconciled. Charles himself exits with Rizzo in a garbage truck. Colonel Potter takes Sophie for one last ride before the orphanage adopts her. Finally, B.J. and Hawkeye go together on B.J.'s motorbike to meet Hawkeye's chopper. As Hawkeye looks down over the desolate camp, he sees a message B.J. has left on the pad: a GOODBYE marked out in stone.