Shawn and Gus are at the police station when the cops bring in Ryan Bainsworth for murder. Ryan's hands are covered in blood but he insists he's innocent. Juliet tells them they've arrested Lyin' Ryan, a notorious compulsive liar who has called in countless tips, only to lead the cops on wild goose chases. It looks like this time Ryan actually committed a crime himself. Shawn and Gus follow Juliet to the observation room, where they listen to Lassiter questioning Ryan on the murder of his super in his apartment. Ryan claims that he asked his super to fix his disposal after clogging it with cinnamon sticks and lemon wedges from a marinade and to check the pipes because the polarity is off and the water drains counterclockwise. When he got home he found his super bloody on the floor and tried to revive him. He insists the real culprits are actually two hired assassins. He tells Lassiter that the night before, he was in a restaurant eating special twice-fried fries, when a car crashed through a window across the street. As he turned to look, he overheard a guy with curly q's on his face talking to his companion about killing someone with his belt buckle. Obviously, the assassins realized he overheard them, came to kill him and got his super instead. When Lassiter, who isn't buying any of this, asks how they would know how to find him, Ryan admits he put up flyers around the neighborhood in an attempt to find them and stop them. The cops are incredulous but Ryan is desperate, saying that if they don't believe him someone else is going to die. Fortunately, Shawn sees that this time Lyin' Ryan is telling the truth.
Shawn, knowing all liars lies are based in a kernel of truth, and not wanting an innocent man to go to jail, starts his investigation with the fries. At the restaurant, Shawn and Gus discover Ryan was not only telling the truth about the fries, but also about the car crashing through the window across the street. The waitress also confirms the presence of two threatening looking guys in the corner, and remembers they ordered a beer and a cup of hot water with cinnamon sticks and lemon wedges. The hostess confirms that one of the men had a handlebar mustache - curly q's on his face - and a gun on his belt. Lastly, the valet tells them the men exchanged a bag of cash. Realizing that since Ryan was telling the truth about the hit men, he might be telling the truth about the assassination plot and someone's life could very well be in danger. But Chief Vick, having gone down this road with Ryan too many times, refuses to let them speak to Ryan unless they have concrete proof. Shawn and Gus head to Ryan's apartment where they see the super's blood sprayed across the wall. If Ryan had killed his super, the blood would have been all over his clothes, not just his hands. Ryan was telling the truth about just trying to revive him. They have to find the assassins and since the only way to do that is with Ryan's help, Shawn and Gus bail him out of jail.
On the way, they run into a very angry Lassiter who spent all day in court waiting to testify because the defense attorney didn't show up again. Once outside, Ryan tells Shawn and Gus he overheard a time - 10:00 to 4:30, a place - 420 something, and a name - Tom. Shawn sends Ryan on his way so he and Gus can research this new information at the Psych office. But Gus, shouldering all the work as usual, eventually gives up and goes back to his route. Shawn is then forced to call in Henry, once known as the human lie detector, for help with Ryan who then confesses to the murder. When Shawn confronts Ryan, he says he lied to Henry because they don't know whom they can trust. Shawn, frustrated, insists Ryan stop with the lies and just be Ryan. Just then Gus calls from his route. He's figured out where the hit is going to be - at the hospital. They call Lassiter and Juliet down but the supposed victim, Tom Lieber, ends up being an amnesiac with a boring life who apparently ran into a car a few days ago just after six on Anapamu Street. Since he's slowly regaining his memory, the only thing interesting in his life is that his accident and recuperation is being covered by the paper. Seeming like another of Ryan's goose chases, Lassiter leaves to take a call from the Chief, who tells them the body of the missing defense lawyer was found in a building on Gardner and Carrillo.
Back at the police station, Shawn asks the Chief if the murdered lawyer could be the victim of Ryan's assassination plot, but Vick, admitting the thought actually crossed her mind, tells him it's impossible. The lawyer was murdered on Tuesday around 6pm, the day before Ryan allegedly overheard the hit men talking about killing someone. McNab brings in surveillance footage near the crime scene and the cops leave to take a look. Shawn holds Gus back, and they realize that the lawyer was murdered around the same time and place that Lieber was hit by a car. Everything connects back to Ryan's story. They catch up to the cops and see footage of Lieber running away from the crime scene. The cops take this to mean Lieber killed the lawyer then got hit by a car as he fled the scene. Vick sends Lassiter and Juliet to the hospital to arrest Lieber before he remembers what he did and flees. But Shawn sees something else on the tape - two shadows chasing Lieber. He realizes Lieber saw Ryan's assassins kill the lawyer and ran for his life right into traffic. The killers, following Lieber's recovery in the paper, know Lieber becomes more of a threat every day and will try to eliminate him again. Shawn and Gus race to the hospital to warn Lassiter and Juliet but Lieber is already gone. Dejected, they get back in Gus' car to find Ryan and Lieber hiding in the back seat from the killers who Ryan insists are right on their tail. Gus careens into traffic as Ryan explains he had to get Tom out for his own safety. Gus, not seeing anyone following them, pulls over into an alley. But just as Shawn convinces him to trust in his belief in Ryan, the killers pull up and start shooting at them. Gus crashes the car and they are forced to escape on foot. Tom, still recovering, has problems keeping up so Shawn has Gus take him to safety and call for help as he and Ryan try to slow down the killers. Shawn and Ryan then spin the lie of their lives and nearly convince the killers they are surrounded by cops. Just as the hit men realize they've been duped, shots ring out. Lassiter and Juliet have arrived in time, making it appear Shawn and Ryan had been telling the truth all along. Back at the Psych office, Ryan thanks Shawn and Gus for believing him, realizing that his lying might have cost an innocent person his life. He's turning over a new leaf and from now on he's going to be just Ryan, he tells them, as he leaves to captain a hot air balloon in a multi-state regatta.
- Pineapples appear in Tom Leiber's cup on the tray in front of him at the hospital. There are also crates filled with pineapples, as well as pineapples in the dumpsters, when Shawn and Ryan are trapped in the alley near the end of the episode.
The gallery for Truer Lies can be found here.
The list of references to pop culture and other media from this episode can be found here.