Blake and Krystle have to break off their honeymoon, because Blake's in a bit of a crisis at work, and he has to go home to do business. Walter gets in trouble with the workers on his rig, but he gets it all straightened out, and both Matthew and Steven get a job there. Blake doesn't like this. Krystle has problems getting along as a wealthy woman, with all the servants and the money. Matthew and Claudia fight alot, they both think it's difficult to start this new life. Cecil and Fallon have negotiations of their own. Cecil is going to help Blake out of his problems, if Fallon marries Jeff.

Walter takes Steven to a bordello to try to ""straighten him out"". Something goes wrong at Matthew and Walter's rig, Steven is blamed for sabotaging, and though he's innocent, he looses his job. Blake's plan now is to take Walter and Matthew's rig when they're in trouble. Krystle doesn't like Blake's methods in his work. She pawns an emerald necklace and loans Matthew the money to help him. She makes a false copy so Blake won't understand it's gone. In the end, Matthew and Krystle kiss, but Krystle breaks it off and leaves.

Claudia is released from the hospital. When she comes home, she tries to kill herself by taking an overdose with pills, but she's saved by Blake's friend, dr. Nick Toscanni. It turns out that Nick's secret plan is to get back at Blake for something that happened in the past. Fallon and Jeff decides they want to have a baby. Claudia moves into the Carrington mansion. Blake tries to get Alexis out of his property. Alexis tells Steven that he is Blake's only child and that Fallon's father is another man.

Fallon and Jeff's baby, Little-Blake Colby, is brought home. A nurse called Susan is hired to take care of him. Alexis accepts Cecil's proposal and they start making wedding plans. Claudia finally remembers exactly what happened the night she got injured. Rashid Ahmed wants to do more business with Blake.

Mark is charged with attempted murder and arson; Alexis tells Blake and the police his motive was revenge. The other suspects-McVane, Hess and Adam, are questioned and released. After Alexis destroys Fallon's relationship with Mark, Krystle suggests she is seeking revenge because Mark rejected her. Kirby breaks down and tells Krystle her baby is not Jeff's; an unknown man in surgical garb tries to smother Alexis. Blake and Jeff receive a frantic call from Joseph, who is muttering incoherently. At the bungalow where Kirby was born, Blake and Jeff find the disturbed butler with a gun. Before they can stop him. Joseph pulls the trigger and kills himself.

As Fallon plans to wed Peter, Claudia advises her of his womanizing. Fallon dismisses Claudia's concern, however, as she has with all the others who question the wisdom of her marrying Peter. Tracy sleeps with a newspaper reporter in exchange for a damaging story to scandalize Krystle. After Allegre is safely returned, Blake questions Jack Crager, the horse's trainer. After their meeting, Jack quickly phones Peter, who instructs the horse trainer to disappear until further notice. Distraught after learning that Peter has suddenly left the country, Fallon runs into the path of an oncoming truck. Jeff and Blake look on in helpless disbelief.

After a twenty-year absence, Blake receives a visit from Jason Colby. Jason proposes the two tycoons build a joint pipeline. Although reluctant to do business with Colby because of his past shady dealings, Blake needs Jason's tankers to move his oil out of China. Jason confides to his sister Constance that he is dying. Jeff is surprised to hear from his aunt Constance, who insists it is urgent he come to California. Psychic Justin Dehner helps in the search for Fallon, who remains in California with Miles. Dex is furious with Alexis's growing obsession with Galen. Michael shuts Amanda out of his life. Gordon Barrett, assistant undersecretary of state, questions Blake about the revolution in Moldavia. In New York, Joel and Sammy Jo convince Rita to undergo plastic surgery to complete her transformation into Krystle's double.

Jason imposes a one-week deadline for Blake to decide on the pipeline proposition. Claudia heads to San Francisco to think about her relationship with Adam. Alexis turns to both Blake and Jason for help in rescuing King Galen. While riding with Miles, Fallon is surprised to learn she is an excellent horsewoman. Under the guise of a business trip, Adam tracks down Claudia for a romantic reunion in San Francisco. In Los Angeles, Constance Colby stuns Jeff--and enrages Jason--by awarding her nephew 50% of Colby Enterprises, worth over $500 million. When Krystle makes a surprise visit to Sammy Jo's apartment, Rita, who now appears to be Krystle's double following plastic surgery, hides in the bedroom. Jonathan Lake of the State Department tells Dominique they've met before--when she saved his life in Paris.