At a party in her honor, Sammy Jo embarrasses the Carringtons and reveals to Fallon that Blake is not her father; Jeff leaves the party with Claudia; Blake tells Krystle his eyesight is restored; Fallon is left unconscious after a car accident.
Fallon gives birth to a son; Alexis offers Sammy Jo $25,000 to leave Denver; Jeff and Claudia make love; Krystle accuses Alexis of killing her baby; Alexis learns Krystle and Blake are not legally married.
Upon learning he is not her true father, Fallon refuses to see Blake; Jeff falls in love with Claudia, who is caught stealing from Denver-Carrington; Fallon's baby undergoes emergency surgery; Claudia's husband and daughter are believed dead.
A blood test proves that Blake is Fallon's true father; Steven travels to Hollywood in search of his wife; Claudia learns her husband and daughter are believed to be dead; as Krystle struggles with an armed Claudia, the gun discharges.
Fannon and Jeff reconcile after Fallon hears Jeff at his father's grave site. Blake turns down Farouk Ahmed's business offer realizing he was just trying to bail his brother Rashid out of trouble. Alexis is building a reception tent for her wedding on the Carrington estate which angers Blake. Her wedding plans are threatened when Cecil Colby has a heart attack when they are in bed together. Claudia is getting deeper and deeper into a confused mental state and seems to be planning something. Farouk tells Nick Toscanni that Blake was in country during Nick's brothers ...
Krystle finds Blake in the mountains and gets him to the hospital. Nick Toscanni disappears. Cecil is also brought to the hospital, and he's very weak. A police investigation is started to find the baby. The suspects are: Farouk Ahmed, Nick Toscanni, nurse Susan, and an old cemetery worker called Alfred Grimes.
Michael goes to Denver to find out who he is. Alexis and Cecil plan a wedding in the hospital. Claudia disappears and Blake suspects her of kidnapping the baby. There's an exiting drama on the roof of a tall building. Claudia has the baby in her arms and refuses to give her away, thinking it's Lindsay.
The baby is recovered from the real kidnapper, Alfred Grimes, and it turns out he's the father of Roger Grimes. Fallon fires Susan. Claudia leaves for a sanitarium. Fallon starts looking for a job. Blake gives her his hotel La Mirada. She and Michael meet, but without knowing they may be brother and sister.
Cecil leaves his estate and Colbyco to Jeff and Alexis. He also reveals his "Rhinewood" game to Blake at the reading of his will. Blake suspects Alexis of being a part of it. Adam finds Alexis and shows her the silver rattle he had when he was kidnapped and she believes him.
Alexis gives her newfound long-lost son Adam a job at Colbyco. Blake starts to believe that Adam may actually be his real son. Fallon and Adam keep flirting with each other, not knowing they are siblings. Adam has dinner with Krystle and Blake, but it ends with a conflict. Alexis finally meets Krystle's first husband, Mark.
Joseph's daughter, Kirby comes to stay with the Carringtons after breaking up with her fiance in France. Joseph tries to persuade her to go back to him. Mark gets the job at Fallon's hotel. Blake tries to get help from congressman Neal McVane. Jeff and Adam have problems working together. Adam gets the hold of a toxic chemical mixture.
Fallon gets a letter from Steven and it turns out he's on an oil rig in the Java Sea, Indonesia. Adam mixes the toxic compound in the paint for Jeff's new office. Fallon hires Kirby as a nanny for little Blake, and throws a big opening party for her hotel, which she now calls "La Mirage".
Jeff starts to become dizzy and affected by the toxic paint Adam used in his office. Joseph tells Kirby to stay away from Jeff. Krystle goes to Acapulco to find out what really happened with so-called divorce from Mark. Blake comes after her to be with her and she tells him the truth. The oil rig Steven works on explodes.
The Carrington family is informed that Steven's oil rig exploded. Blake goes to look for him, with an uninvited Alexis. Sammy Jo's father returns to Denver to collect Sammy Jo's share of Steven's inheritance, but Krystle throws him out.