Living together begins to take its toll on Kelly and Brandon's relationship. Donna asks David to move back in with her at the beachfront apartment, but with a stipulation that they sleep in separate rooms and that he doesn't tell her parents. Meanwhile, Steve has a couple of run-ins with Carly Reynolds - a young, overprotective, sarcastic, single mother with a six-year-old boy named Zack - who Steve wants to know more about.

As Christmas approaches, Gina's meeting with Dr. Martin as her biological father is awkward and unsatisfying, similar to Janet and her parents when they accidentally run into each other at a Christmas tree lot. Steve eventually confronts Janet's parents and tells them to stop acting cold towards her and him. Donna's mother, Felice, offers to help Gina financially, but she refuses. Meanwhile, Donna can't let go of Noah's accident years ago resulting in the death of his girlfriend which leads to her and him considering breaking up. Also, Dylan loses control in front of kids during a Christmas gathering at the community center when he punches a belligerent neighbor complaining about the center's residents hanging around his house. Matt takes advantage of a client's latest fee to buy Kelly an engagement ring and proposes marriage which she accepts. But Dylan confides in David about him still having strong feelings for Kelly.

The loss of a client's business puts Matt in financial straits because of the engagement ring he bough for Kelly which was paid for with the retainer. Gina tries to help Matt by asking Dylan for the $15,000 Matt owes, but Matt refuses the money because of his own pride and reliance, while he begins lying to Kelly about his financial problems. Meanwhile, Dylan grows uncomfortable about God-parenting to Kelly because of her engagement. David and others benefit from a man's crush on Donna whom she asks out on a date that flops. Also, Noah attempts to fight his loss over breaking up with Donna by hanging out with a pair of wild and crazy swingers, named Josie and her brother Shane, that come to the After Dark every night.