An uneasy truce is called between the two combatants. Following orders from high command, Breetai contacts the SDF-1 and requests permission to negotiate a settlement between the civilizations. Exedore is escorted to the battlefortress as a representative for the Zentraedi people.

Max Sterling anxiously waits for Miriya in Macross City park. Until now, he has spent most of his time in pursuit of battle. Now he finds himself involved in a totally different crisis, but it’s not the one he expected. Miriya attacks on sight. Max demands an explanation as he frantically tries to protect himself. Miriya snarls: "Time and again you have made me look like a fool. I am the Zentraedi’s greatest pilot and will not be humiliated by a Micronian. The first time you were lucky; the second was your final victory. This time, I will win. I will defeat you!"

The alien defectors have provided captain Gloval and First Officer Hayes with new hope that peaceful co-existence is possible between the people of Earth and the Zentraedi. In light of this development, Lisa volunteers to return secretly to Earth and try once again to persuade her father, Admiral Hayes, and the other military commanders to begin peace negotiations with the alien leaders.

The crew of the battlefortress has responded to the Zentraedi’s latest attack with a great show of force, but the fighting works its way inside to the streets of Macross City. Khyron’s troops overrun the civil defense patrol’s resistance. The warlord is positive that this time, victory will be his. However, his gloating is interrupted when he notices odd behavior among some of is men. When he questions them, they explain that they’re looking for Minmei. Khyron forbids them to pursue their quest. They ignore his orders and run away.

Taking advantage of a lull in the war, the citizens of Macross City look forward to the premier of Lynn Minmei’s first film. It’s a martial art epic featuring the young singing star and her cousin. Kyle’s Kung Fu expertise has made him a natural for the hero of the picture. The crowd finds the film delightful as they watch the romantic story evolve around the two stars. They enjoy the action sequences when Kyle vanquishes Zentraedi villains with the panache of a new Bruce Lee.

Captain Gloval’s dream of evacuating the civilians aboard his ship has come to a disastrous end. He learns that the barrier overload has wiped out an entire city as well as its surrounding countryside. The people of Earth know nothing of the circumstances that led to the explosion, only that the battlefortress is a threat to life and property. The Ontario quadrant withdraws its offer to take the civilian refuges. The SDF-1 finds itself homeless again. Gloval receives his order: The United Earth Council hereby orders you to remove your vessel from any proximity to the earth. You are also ordered to keep the civilians refuges on board your ship. If these orders are not followed to the letter, we will be forced to take steps to see that they are.

The catastrophes of war have reduced the civilian population of Macross City to 56,000. Captain Gloval is desperate to have the survivors relocated on Earth before anyone else is killed. He broadcasts his request over open airspace, realizing that he will be refused again but hoping that someone in the government will hear and do something about the impossible situation. Gloval will not rest until his orders are changed. His persistence pays off. The North American Ontario quadrant agrees to accept as residents any civilians from the SDF-1 who whish to return to the planet.

Rick Hunter comes out of his delirium and spends a long time recovering form his wounds. He is quickly bored with having so much time on his hands and so little to do. Lisa Hayes arrives to visit Rick in the hospital. She is awkwardly apologetic and only stays for a short time. Claudia Grant is the first to guess the reason for Lisa’s unusual shyness and confronts her with the fact. Claudia knows Lisa’s in love with Rick. Her advice? “Stop moping around and act like a woman.”

Rick Hunter has survived a direct hit during an incredible aerial dogfight – but just barely. He has bailed out of the plane and now lies wounded in a base hospital. While his body fights for its life, his mind races through an emotional journey. It is a delirious dreamscape filled with distorted memories of the past two years that particularly concerns his relationship with Lynn Minmei and his new feelings for First Officer Hayes.

The announcement of the governing council’s decision not to allow the residents of Macross City to return to Earth is met with a rage-induced riot on board the SDF-1. The civilians resent their subordinate position. A strong anti-military feeling prevails – with Lynn Kyle as an able spokesman. He had been a member of the peace movement on Earth. Charisma seems to run in the family; Kyle creates as much of a stir as his cousin, Minmei.

After two years of fighting its way back to Earth, the SDF-1 is home. Captain Gloval and First officer Lisa Hayes prepare to meet with the United Earth Defense Government at its secret headquarters in the Alaskan wilderness. Their mission is crucial. They want to convince the governing council to work towards a truce between the Zentraedi and the people of Earth.

Captain Gloval prepares a report that describes all that has happened to the SDF-1 and her inhabitants, from the fateful maiden launch festivities to their return to Earth.