After spending the summer with his mother in Philadelphia, Dawson returns to Capeside and meets a beautiful, outgoing, young woman, named Eve, on the bus from Philadelphia. Eve soon brings trouble to Dawson's ho-hum life when he accidentally wrecks his father's boat during an outing with her and tries to come up with $3,000 to repair it before Mitch finds out. So, Eve helps out by throwing a rave party at the Leery house with strippers from the club she works at. Meanwhile, Joey, who has frozen Dawson out all summer for forcing her to rat out her father, realizes that she still has feelings for him again when they meet during the first day back at Capeside High as juniors. While working at the Capeside Marina, Joey deals with the come-ons from her sexist boss Rob Logan. Jen gets more than she bargained for when she tries out for Capeside High's cheer leading squad and faces off in a war-of-wits against the mean-spirited head cheerleader, and acquires her position. Also, Mitch gets a new job as Capeside High's varsity football coach, and a new charismatic, but very stern, principal, named Howard Green, arrives to administrate the school.

Dawson is stunned when Eve presents him with stolen copies of the school's PSAT's and everyone is tempted to cheat, including Joey whose scholarship to Harvard is dependent on her SAT scores. But when the test goes missing, Dawson wonders who stole it and accusations run high, especially with Pacey. Meanwhile, Jack feels that the whole football team is verbally and physically beating down on him because he is gay, while Henry Parker asks Jack for advice on talking to Jen. Also, Rob Logan continues to make Joey's life difficult at work after she turns down an offer to go on a date with him.

During a late-summer heat wave, Dawson plays detective when Eve's mysterious ways, including breaking and entering at Grams house, cause him to wonder about her reasons for being in Capeside and he gets Pacey to help him. But Eve is too slick for Dawson's inept detective ways and throws him off balance every time. Meanwhile, Joey's misgivings of Rob lead her to crash his date with Andie at the movies which leads to him firing her. Also, Jack goes against Jen's wishes and sets her up for a rendezvous with Henry.

Nominated for Capeside's Homecoming Queen, Jen wins and is put in charge of planning the Annual Homecoming Queen Gala, where she shocks the prim-and-proper committee president, Constance Freckling, and the entire town with the entertainment, while Jen also asks the painfully sky Henry to be her date. After Joey and Pacey save Andie from the libidos Rob, she wants to get back together with Pacey. But Joey becomes suspicious that Andie may have orchestrated the event to make Pacey her savior. Meanwhile, Dawson is distressed with his mother, Gail, unexpectedly returns from Philadelphia, and soon learns that she was fired from her job, while he is torn about telling Jen the scandalous secret he has about the departed Eve.