In the peaceful coastal New England town of Capeside, Massachusetts, Dawson Leery, a 15-year-old film buff, lives a fantasy life of movies and filmmaking with his lifelong friends, tomboy Josephine "Joey" Potter and the outgoing and clownish Pacey Witter. On the day before starting the new school year as a sophomore, Dawson meets and falls for newcomer Jennifer "Jen" Lindley who arrives from New York City into the house next door to Dawson's to help her grandmother care for her invalid grandfather. Dawson's new bonding with Jen makes Joey slightly jealous which comes out during a movie outing with her, Dawson, Pacey and Jen. Meanwhile, Pacey finds himself growing in love with a new mystery woman that comes to town, Tamara Jacobs, who turns out to be the new English teacher at Capeside High School. Also, Dawson tries to get into Capeside High's film class, but is denied for being a sophomore.

It's the night of the school dance. Dawson reveals his feelings for Jen. Joey confronts Dawson's mom with what she has seen. Pacey confronts his teacher over 'that kiss'.

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.

Dawson turns to Jen for comfort after learning about his mom's affair with her co-anchor, Bob, as well as Joey's knowledge of it. But he regrets doing so when Jen tells him some of her own problems involving her promiscuity and the real reason her parents forced her to move to Capeside. Meanwhile, Pacey and Tamara continue to temp fate with their affair, which was compromised because Dawson accidentally videotaped it.

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.

An economics class project pairs Dawson and Jen as husband and wife, as well as Pacey and Andie as a married couple. Jen, with a little of Abby's help, tries to take advantage of this project to get closer to Dawson, while Pacey gets to know a little more about Andie's background from Jack. While doing this project, Joey learns that as a single parent, she has a better chance of success in life, but does not see the same for Bessie who begins pressuring her to work harder at the Ice House. Also, Mitch and Gale's marriage continues to deteriorate to a point where neither one wants to be around the other.

Tamara Jacobs, the former Capeside High English teacher who left town to avoid a scandal after her affair with Pacey was almost exposed, shares an awkward reunion with him as she's temporarily back as a real estate agent, who is trying to sell Mitch a warehouse which he hopes to open his own restaurant. The encounters triggers old emotions in Pacey and curiosity in Andie who asks Dawson for advice on Pacey's likes and dislikes. Meanwhile, Joey finds a new joy in art and takes the time visiting a gallery with Jack who shares her newfound love, but Dawson does not have the same interests. Also, Abby tries to get Jen to help her flirt with an attractive seaman, named Vincent, who rejects Abby's over-played advances, but accepts Jen's more softer approach.

Emotions run high during the monthly night of the full moon when parental problems cast a pall over Dawson and Joey's new romance as Dawson finds himself stuck in the middle of Gail and Mitch's hostile feud over people they invite over; he with Miss Jacobs over the property and she with a new co-worker. Meanwhile, Pacey is troubled when he tries to meet Andie's elusive parents, and sees first-hand the home life that Andie avoids which involves her delusional mother unable to let go of Andie and Jack's older brother whom died the previous year. The rife between Jen and Abby increases as Jen invites Vincent over to her house for a date. Left alone to run the Ice House, Joey and Jack share a 'tender moment' during a power outage.