Joey is looking for a new job and gets one as a waitress at the Yacht Club Restaurant pretending to know a very affluent family. But she is tricked by her boss' snobbish, trouble-making son, Drue Valentine, who sees through her lies, but decides to let her stay on in order to get to know her better. Meanwhile, Mitch, now working as a guidance counselor at Capeside High, tells Pacey he's not going to graduate unless he makes up for his bad grades. Pacey doesn't want Joey to know, but Mitch tells Dawson, who tells Joey. Gretchen also finds a new place to live in the form of a wretched beach front house, and Pacey willing moves in with her. Jen gets ticked off after the departed Henry breaks off their relationship by e-mail whom he sends to Jack instead of her.

Pacey, enlightened by getting good grades, decides to take a sail on his boat and takes Jen with him for company. Meanwhile, Andie has an interview with Drue's mother for a college acceptance. But her medical records get in her way in which the egotistical and snobbish Mrs. Valentine worries about Andie's mental stability and outright denies her the spot. Everyone's plans change when a big storm rolls into Capeside, trapping Pacey and Jen at sea where Dawson and Joey steal a motorboat, owned by a cranky old resident, A.I. Brooks, to rescue them while Andie takes control of the situation at the Yacht club to wait out the storm. At sea, Jen and Pacey admit to each other their biggest regrets in life. Jen regrets never being in love, despite her feelings for Henry, and Pacey regrets the destruction of his friendship with Dawson.

While Andie is recovering from her near-fatal drug overdose, Jack blames Jen for the incident, while Jen blames the deranged Drue for her life falling apart after he turns everyone, including Grams, against Jen by saying that she deliberately slipped Andie the ecstasy. Andie's father tells her that it would be better if she were to spend the rest of the year in Italy with her aunt, since she already has the credits required for an early graduation. Meanwhile, Joey is conflicted when she must ask Dawson to say a good word for a college acceptance form. Also, Dawson continues painting the misanthropic Mr. Brooks' house and realizes that the old man has his own personal life problems with his estranged family.

A sailboat owned by Capeside High's pompous Principal Dave Peskin, with "Class of 2001" written on the sail, and with his pet dog aboard, is found in the school swimming pool as part of a major school prank. As a result, Mitch Leery and Principal Peskin are after the guys who did it in which Dawson, Pacey, Jack and Drue are main suspects. Since, the dog that was on the boat instantly recognized Jack, Pacey had access to the yacht club and Dawson had access to the school keys. Each one has alibis for that day; Jack was at the soccer field with Jen to help plan a game. Dawson was cleaning Mr. Brooks parlor where he discovers that the that the old man was a former filmmaker from the 1950's. Pacey was with Doug on a routine police patrol where they squabbled about Doug's well being. Drue, despite his denials, is revealed as the culprit. But at the end, Joey finds out that Dawson, Pacey and Jack all teamed up to pull it off and to get Drue into trouble.

Jen reveals an important decision she's made with regards to college while Jack and Grams make a decision on their own for her. When Dawson comes up empty with answers to an important question on his college essay on registration for USC Film School, he turns to Mr. Brooks for inspiration and learns that Mr. Brooks' life in Hollywood eerily parallels Dawson's own life when Mr. Brooks left the filmmaking business after his best friend and girlfriend got together. Meanwhile, Pacey accompanies Joey to a formal party at the Yacht Club for prospective Worthington College students where the visiting dean, Walter Kubelik is impressed... with Pacey. Also, Gretchen takes over planning for Gail and Mitch's Christmas party at the restaurant where Mr. Brooks has a meeting of minds with Grams Ryan.

Pacey learns that Dawson and Gretchen are dating which doesn't suit him at all. So, Pacey tries to get Gretchen and her ex-boyfriend, Nick Taylor, back together when they go on a road trip to pick up her car at her college in Providence. Back in Capeside, Joey has her fair share of problems when she gets locked in a storage closet at the Yacht Club with none other than the loathsome sociopath Drue Valentine, whom has set up the whole thing to avoid visiting his estranged father in New York. Meanwhile, Dawson observes the feelings growing between Mr. Brooks and Grams and fears that Grams will get hurt when she finds out that Brooks, like her last husband, is terminally ill with cancer.

Mrs. Valentine forces Joey to go on a double date with Pacey to accompany Drue and his wealthy, dim-witted, girlfriend, Anna Evans, to make sure that Drue behaves himself. Of course this isn't an easy thing to do when Joey starts to get concerned over the attention that Anna is bestowing on Pacey. Meanwhile, Dawson has his own problems when he and Gretchen go out with two of her college friends and he realizes the span in between their ages. Also, Jack finally gets some positive attention from Tobey when he asks Jack for help in teach reading to grade school kids, and Mr. Brooks becomes more weaker from his illness during the final completion on Dawson's documentary. Knowing that his days are numbered, Mr. Brooks tells Dawson to continue to follow his dream as a filmmaker and not let the love of his life (Joey) slip away, and end up like him: a bitter, misanthropic, lonely old man.