It is 1987, and Henry is telling Shawn how babies are born. Shawn doesn't believe him and wants to know how are them made. Henry then tries to change the subject by asking how many hats are in the room and Shawn says that there are none. He then decides to ask his mother. Henry then tells him to wait, before telling him to tuck in his shirt before he talks to her.
Present day, Interim Chief Vick calls Shawn and Gus down to the station. She has something big and top secret to talk to them about. The guys are excited until she tells them she wants them to find her a new nanny. Her last nanny left, she hasn't slept in weeks and she needs them to psychically screen the candidates for her.
As Gus begins his research online for the perfect nanny, Shawn insists that all the best ones are already employed. Which means they need to go to the playground and poach the best candidate. While there talking to some nannies, Shawn learns that they all come from the same nanny agency, Red Balloon, and that some of them are thinking about asking to be reassigned due to a string of neighborhood burglaries. All of the break-ins happened during the day to houses that have security systems. Even though none of the nanny houses were hit, they don't feel safe. Meanwhile, Gus is trying to covertly interview nannies, but is coming across so creepy, they end up calling the cops on them. As McNab shows up to escort them out, he gets a call about another burglary. Shawn and Gus ask him to take them to the crime scene but when they get there, they find more than they expected as the owner of the house has been murdered. Like the other burglaries, the thieves were able to disarm the security system, only killing the owner on the spur of the moment when he surprised them by coming home sick from work.
They go down to the station to let Vick know what they've discovered on the burglary case but she is desperate and running on fumes, putting everyone in the station on edge. She insists they use all their resources on finding a nanny and stay away from the burglary case. On his way out, Shawn discreetly takes pictures with his cell phone of photos from the case file on Lassiter's desk.
Back at the Psych office, Gus is continuing the nanny search in earnest and has narrowed it down to three candidates - all of which Shawn immediately dismisses with a glance. Shawn checks the pictures on his phone and sees that two of the houses have the same security company, Startek. When he gets to Startek, Lassiter and Juliet are already there. Lassiter suspects the guards of being in on the burglaries but Shawn realizes quickly they don't have the aptitude to pull of the heists. He see the addresses of the other houses hit, but when he calls Gus to pick him up to do recon, Gus refuses, saying they need to focus on Vick's nanny. Instead, Shawn is forced to get Henry to drive him around the neighborhood. Henry gets Shawn to see that the other houses in the area are actually easier targets than the ones that got hit. Those houses were chosen for a reason. Shawn then sees one of the nannies from the park coming out of the house next door with expensive sunglasses, possibly bought with money from outside her income. The nannies are somehow related to the robberies. He needs to investigate the Red Balloon Agency.
With Gus busy working on the case they were actually hired for, Shawn gets Juliet to go to the agency with him and pose as perspective clients. There they meet with Abby Daniels, who runs the agency, who tells them that Red Balloon installs Baby Bonding Cameras in their clients' homes so parents can check in with their nannies and children during the day, the control of those cameras resting solely with the parents. She shows them the video room and introduces them to Steve, the technician, who chews tobacco. While there, Juliet gets a call from Lassiter saying that he's found some of the stolen merchandise at a pet store fronting for a fence. When they get to the store, Shawn sees evidence of chew and has a "vision" that the person who sold the merchandise was Steve Hitchcock from Red Balloon. It's not the nannies who are behind the burglary ring. It's the agency. Of course, just then Gus calls to say he's finally found Vick the perfect nanny - from the Red Balloon agency.
Shawn and Gus go back to the agency to figure out exactly how they are pulling off the crimes. They find a hidden wall panel that moves back to reveal another set of feeds from the baby bonding cameras, and a joystick that controls the camera angles. Abby and Steve must be pointing the cameras at the neighbors' houses, getting security codes and times the they would be empty. On the monitor, they see Abby and Steve at Chief Vick's house and call Juliet to tell her and Lassiter to meet them over there. When they get there, Vick thanks them for her new nanny, who has finally gotten her daughter Iris to sleep. Which means, Shawn has to explain the case in a whisper, as not to wake her up. Vick now has to arrest Abby and Steve, but all is not lost. Her former nanny has decided to move back to town, allowing Vick to finally be able to get some sleep again.
- The title twists the 'Rock-a-bye baby' lullaby, first printed in 'Mother Goose's Melody' c. 1765.
- The song which plays when Shawn "proposes" to Juliet is 99 Red Balloons by Nena. The nanny agency in this episode is the Red Balloon Agency.
- Shawn tells Juliet that he has "sensed" that he and Juliet will be married one day. They actually do get engaged toward the end of the show.
Chief Vick: Look, I'm trusting you both to be professional and to keep this matter completely confidential.
Gus: You got it.
Shawn: If you knew how many secrets I was keeping from you already, you'd totally trust me.
Buzz: Listen, I got a call about two creepy dudes hanging out in the playground.
Gus: Really? I haven't seen anything, but I'll keep my eyes open.
Shawn: We've just been here hanging out in bushes.
[Buzz makes a face and it dawns on Shawn and Gus that they're the creepy dudes]
Shawn [pretending a stuffed animal is talking to him]: What's that? ... The bear snores really loud, he's pretty sure the turtle's really an alien, and all the monkey wants to do is play "pull my finger."
The gallery for Rob-a-Bye Baby can be found here.