The class movie hits some trouble, giving Dawson an advantage. Joey falls in love with a visitor to the town. Pacey's school achievements and his relationship with Tamara intensify. Dawson brings his feelings about Jen out into the open.

When a major hurricane strikes Capeside, all the principal characters take refuge in the Leery home, including Joey's very pregnant older sister Bessie and her boyfriend, where Jen's overly religious grandmother does not hide her bigotry towards them. Also, Dawson rages at Jen about her past and at Joey for not confiding in him about her mother's philandering. But when Mitch learns about Gail's affair, he angrily storms out of the house, leaving a tormented Dawson to deal with the fallout. Meanwhile, Pacey takes shelter at Tamara's beach house with his brother Doug, a local policeman, where he ruins his brother's chances to hook up with Tamara by secretly telling her that Doug is gay.

Capside is abuzz with rumors of a teacher's indiscretion, rumors that could prove fateful for Pacey and Tamara. Pacey then takes it upon himself to go before a school board hearing to admit to personally fabricating the rumors to clear Tamara. Meanwhile, Joey and Jen get a life lesson when Bessie is aided by an unlikely source, Grams Ryan, when she goes into labor and gives birth to her baby in Dawson's living room, with Dawson videotaping the whole thing.

Joey's friends and their families work together to make sure that the opening of Potter's Bed & Breakfast is a success and that she and Bessie don't lose everything they have after Pacey surprises them with a visit from a prestigious travel critic. Meanwhile, Jen admits her concerns to Grams about getting close to Henry. Jack considers moving back home to his own house after hearing Andie's loving plea. Also, Dawson tries to understand the connection between his parents after their divorce.

Joey is chosen to be part of a group of students to paint a school mural, but when hers is defaced before the unveiling, Dawson offers words of encouragement while Pacey takes action and risks suspension when he goes in search of the culprit whom he suspects to be Matt. When Andie's PSAT scores rank among the best in the country, she feels tremendously guilt-ridden and gambles with everything she has worked for by telling Principal Green about the previously stolen PSAT test. Also, Pacey moves in with his brother, Doug, when their divorced sister and her kids move back into the Witter house and take over Pacey's room.

Joey relies on the support of Pacey and A.J. to rally the students in a major school protest against the school superintendent, Dr. Fielding, after he forces Principal Green to resign for expelling Matt Caulfield who destroyed Joey's mural after the guy's wealthy and powerful parents threaten the school board with a lawsuit. Meanwhile, Dawson and Gail both go back to their respective places in back and in front of the camera to produce a piece about the ongoing school protest which ruffles more than a few feathers of the school board hierarchy as well as Gail's old rival; a reporter named Sherry Eisle who "stole" Gail's old job back in Philadelphia and is now covering the story in her own self-serving and bias way.

Pressured by two parties, Joey ultimately must choose between her love for Dawson and her new feelings for Pacey who's planning a summer getaway by sailing down the coast on his new boat, 'True Love.' Meanwhile, Grams talks about love and regret with Jen over the departed Henry, and encourages her, with Jack and Andie tagging along, for an all-night drive to Ohio so that Jen can see Henry one last time. They then take Jack to Boston to see Ethan who tells him that he has returned to his boyfriend. Mitch and Gail decide to get remarried and have the ceremony at their house with Dawson as the best man and Joey as the maid of honor. At the end, Dawson encourages Joey to make a move to follow her own path, and she runs off to join Pacey on his boat, leaving Dawson emotionally beaten and alone once again.

Gail drops a bomb on Mitch and Dawson, saying that she might be pregnant, but she is conflicted whether or not to keep her baby. As a result, Dawson seeks solace with his growing hobby of photography and confiding in Gretchen about his troubles. Meanwhile, Joey seeks advice from Jen because she has the feeling sexual intimacy with Pacey is approaching. Jen tells her to go to the clinic as prevention. Bessie finds out and berates Joey about the risks of sex. Also, Jack and Andie are coaching a little league of soccer kids, and he soon lands in an awkward situation when a teammate's older sister starts to flirt with him. He feels pressured to tell her that he's gay, but he soon regrets it when most of the parents turn out to be homophobic.

While Joey glows after being accepted into Worthington University, Dawson is forced to face a crushing rejection when he is denied to NYU. Joey's elated mood, however, is tempered by a sobering realization due to the fact her sister, Bessie, runs a B&B she can't afford the $15,000 tuition requirement, until Dawson proposes a surprising solution: loaning her the money Mr. Brooks left for him in his will, which increases her guilt for lying to him about sleeping with Pacey. Meanwhile, Jen and Jack have nothing but options when it comes to college. While Jack's convinced that New York is the place to go, Jen isn't so sure she's ready to return there because of unresolved issues with her parents. Jen tries asking Drue for advice on her past, but he's no help.

Dawson goes back to Capeside to celebrate Christmas and brings Natasha and Todd with him where Dawson can't get past the fact that he saw Natasha and Max together, and Todd's drunkenness bothers Gail. Joey also arrives back in Capeside with Audrey, where Eddie later arrives with a Christmas tree to celebrate. There Eddie meets and has an argument with Joey's father, Mike Potter, who worries that Eddie might not be good for Joey since he's now unemployed and doesn't go to college. Pacey also comes back to spend time with his brother Doug who does not like the expensive gifts and constant, lavish spending Pacey is doing after making a lot of money at his stock trading job. The gang, as well as Jen and Grams, gather to have Christmas dinner at the Leery household which goes disastrously wrong where a drunken Todd makes an embarrassing thanks, but not as embarrassing as Audrey's, whose drinking problem has gone so out of control that she lashes out on everyone, and wrecks Pacey's new car.