When Jacques Renault is arrested as a suspect in Laura's murder, Leland murders him by suffocating him with a pillow. After killing Jacques, Leland's hair turns white overnight. Leland is arrested, but released on a personal recognizance bond pending trial due to personal assurances made by Sheriff Harry S. Truman that he does not pose any danger to the community. Leland's behavior at times appears abnormal - manically happy at times, exhibited by singing the 1940s popular nonsense song "Mairzy Doats", before crashing into grief. The arrival of his niece Maddie Ferguson, who looks almost exactly like Laura (both roles are played by Sheryl Lee), is of great help to him in learning how to deal with his daughter’s death.

It is eventually revealed that, as a boy, Leland met a strange neighbor who turned out to be a demonic entity named Bob, who would possess him throughout his life. It is also implied that Bob molested him as a child. It is difficult to tell when and if Leland is truly in control of himself and when he is being possessed by Bob. It is implied that Leland killed Jacques Renault on his own – not under Bob's control – and that Leland is lost from that point: he is no longer able to stop Bob and is completely taken over, physically manifested by the change of hair color and a dramatic change in behavior. Finally, Bob takes control of Leland and rapes and murders Maddie. The changes in Leland from this point help Special Agent Dale Cooper to finally identify him as Bob's "host".

When Twin Peaks was revived in 2017, Ray Wise confirmed that he would appear in the new series, once again portraying Leland Palmer. In the second episode of the renewed series, Leland appears in the Black Lodge imploring Cooper to "find Laura". In Part 18, he also repeats his instructions to Cooper when he returns to the Black Lodge.

Leland (played by Ray Wise) is an attorney, with his primary client being local businessman Ben Horne. He is well-known and respected in the town of Twin Peaks. Together with his wife Sarah and his daughter Laura, his family seems to be perfect. When Laura is murdered, however, Leland’s psychological foundations begin to crumble, and it is gradually revealed that extreme dysfunction, including Incest, lies beneath the Palmer family's idyllic surface.