The Walshes trip to Hawai'i doesn't go as planned when their plane is turned around due to technical problems. A woman claiming to be Jack McKay's mistress shows up on Dylan's doorstep with her daughter in tow. David's sexual frustration leads him to be hostile to Donna. A lonely Kelly cracks her tooth on candy and calls Mel for dental advice. Jesse takes Andrea with him to church for midnight mass. The characters all flash back to previous Christmases over the course of the episode.

David's work and study schedule begins to take a toll on him when mid terms come around, leading him to start using crystal meth. His erratic behaviour worries Donna and Kelly. Dylan wants to help Suzanne with her financial troubles by giving her $10 000 but Jim urges Dylan to let him do a background check on her first. Steve decides to take his suspicions about John Sears to their fraternity chapter president. Brandon continues to tutor D'Shawn in sociology but still feels that Professor Randall is giving him preferential treatment. During a basketball game, D'Shawn sustains an injury that he fears will impact his future career prospects. Andrea learns from her new RA that Dan Rubin has transferred to another dormitory.

The side effects of David's burgeoning drug habit cause him to fall asleep in the park whilst babysitting Erin and she goes missing. Brenda, Donna, Brandon and Steve head out of town on a ski trip where Donna meets a handsome ski instructor. Dylan finds himself slightly out of his depth when Erica gets her first period after their swimming lesson. Jim's background check on Suzanne yields some unexpected results and Dylan confronts her upon her return to Beverly Hills. Andrea receives a surprising medical diagnosis.

Brenda hopes to impress Roy Randolph, a visiting Broadway director, when she auditions for the lead role in the campus play of "Cat On a Hot Tin Roof." Steve is reunited with Laura Kingman, where he coaches her for the same lead role, while Kelly also wants in on the part. Meanwhile, Brandon brushes off continuing advances from his new admirer Clare Arnold, the daughter of the university's chancellor, who won't take "no" for an answer when she handcuffs herself to his bed. Also, Dylan tries to help a jealous Erica accept her mother's new chemist boyfriend, Kevin Weaver.

When Brenda and Kelly are called back to final auditions, the resulting competition puts a serious strain on their friendship. Steve continues to coach Laura for the lead, and she ends up making a superior performance, brushing aside Brenda. Meanwhile, Brandon is still being perused by Clare who has a crush on him. So, she tricks Brandon into taking her out to her senior prom at her posh boarding school which leads to Brandon getting decked by an angry passerby at Clare's hotel post-prom party. Also, Jesse's not around when Andrea has a medical emergency and she's forced to call on Donna for help to take her to the hospital. Elsewhere, Kevin continues to charm his way into Dylan and Suzanne's life which makes Kelly feel left out.

After Brenda finally wins the lead role in the play, the unbalanced Laura attempts to sabotage Brenda's acting career by spreading rumors that she granted sexual favors with Randolph to win the lead. Meanwhile, Kevin impresses Dylan and Erica when they visit his lab where he tells Dylan about his clean-up plans for Santa Monica bay which are under funded. So, Dylan asks Kevin if he could act as his beneficiary to open up his own chemical clean-up company, while Kevin also announces his engagement to Suzanne. Kelly continues to resent Suzanne and Kevin's presence which drives a further rift between her and Dylan after she tells him that her 'Woman's Intuation' tells her that something is not right about Kevin and Suzanne. Jesse also suggests more bed-rest for Andrea who continues to feel unwell over her pregnancy. Also, Brandon speaks with Clare's skeptical father over her wild behavior and her advances towards him while she's making future plans to travel with him.

Dylan and Kelly finally call their relationship quits due to him spending more time with Erica, Suzanne and Kevin, and Kelly openly expressing that she doesn't trust Suzanne and Kevin over their continued presence. Erica tells Dylan that she overheard her mother and boyfriend talking about moving to South America, while Kevin and Suzanne easily convince Dylan they want to relocate Kevin's new chemical company to Arizona. Meanwhile, Brenda finds old feelings for Dylan returning when he gives her an opening-night gift medal before the play. Dylan considers investing in Kevin's business offer by financing it, as does Jim who agrees to be a silent partner. Elsewhere, David sees danger of his drug use returning when working with a new rock band for the CU's Mardi Gras. Andrea is hospitalized and has strange dreams, fearing she may lose the baby. Also, Brandon tries to get to meet with an elusive Chancellor Arnold, after he sees that his name is not on a list of task force members to meet the president, thinking that his times with Clare may have cost him the trip to Washington. But, Brandon eventually learns that his name being absent from the list was just a typo mistake all along.

In the two-part season finale, Brandon goes to Washington D.C. as a part of the college task force to meet the president. Kelly follows Brandon to Washington to get him out of a jam when Clare and Lucinda arrive at the hotel to pursue him. At the CU Mardi Gras, David impresses pop star Kenneth "Babyface" Edmunds, and his recording manager Ariel with his keyboard music and Donna catches David in a very compromising position with Ariel. Steve runs into Celeste who's now with John Sears. Kevin and Suzanne get married in a semi-formal ceremony where he persuades Dylan to cut out any outside investment in their business offer. Jim becomes angry at Dylan for making such a rash move and Dylan fires Jim as his financial holder. Dylan then goes to a bank and gives Kevin full power-of-attorney control over his money, unaware that Kevin and Suzanne have had a hidden agenda for Dylan's inheritance all this time. After her major success in the CU play, Brenda gets a scholarship offer to study acting in London and she pays a visit to Dylan's place before leaving. Also, Andrea and Jesse experience the joys and fears of parenthood after their daughter is born.

When Dylan is put in a coma after a car accident while driving under the influence of heroin, bizarre near-death dreams he has mirror his fight for life which involve his drug dealer, his high school principal Mrs. Teasley, Kevin, Suzanne, Erica, Valerie, the Walshes, and his own long-dead father, Jack. Meanwhile, Steve is bothered by the appearance of his annoying and overbearing father, Rush, at a flag-football tournament as part of the KEG sports weekend.

Donna's snobbish mother, Felice, puts Ray's feelings for her daughter to a test by offering him money to stop seeing her, while Ray's alcoholic, chain-smoking, redneck mother, LuAnn, goes Christmas shopping with Donna. Differing family traditions cause tension between the Catholic Jesse and the Jewish Andrea. Clare introduces David to her father during a faculty Christmas party who finds common ground with him over their love of music. Meanwhile, Dylan goes to his old friend, Christine Pettit, from the FBI to help him find his stolen money. Unable to help Dylan, Christine then contacts an alcoholic, former FBI agent-turned-bounty hunter/private investigator, named Jay J. Jones (Jonesy), who contacts Dylan on Christmas Day and offers to track down his money in exchange for getting a full share of it. Brandon is left alone to care for the recovering Kelly when Jim and Cindy leave town to visit Brenda in England and Valerie leaves to visit her mother in Buffalo. Also, Nat hosts a special holiday feed-the-homeless dinner at the Peach Pit.

Dylan recruits Valerie to help him and Jonesy pull off a caper in Punta Brava, Mexico to reclaim his lost money after they find Kevin and Suzanne. Jones and Valerie pose as a couple at a resort hotel where they befriend Kevin and Suzanne (aka: Karl and Kitty Cavendish) in order to get to know more about where they keep Dylan's stolen money. But when Dylan wants to rescue his sister Erica, Jones backs out, leaving Dylan to carry on a rash rescue attempt alone. In Beverly Hills, Brandon feels threatened by Kelly's relationship with Professor Finley when Brandon starts dealing with criticism by the dean concerning the professor's tenure and his unorthodox teaching methods. When Brandon meets Professor Finley for the first time to question him about his teaching methods, he sees another side to Finley who lashes out at Brandon which causes a rift between him and Kelly.