Neely Capshaw, the unwholesome, psycho lifeguard who tried to frame Matt for sexual harassment, arrives back at Baywatch for a job as the switchboard operator and is greeted with a hostile reception from everyone, especially C.J. who personally holds Neely responsible for Matt's departure from Baywatch.
Neely and Cody try to keep the four people alive on the sunken oil rig until help arrives when Mitch, Stephanie and Logan must find away to get into the structure to rescue them before the air supply runs out. At the end, despite Neely's heroic attempts and proving herself to be a very good lifeguard during the rescue, the Baywatch team still resents her presence and plans to give her a hard time. Logan finally gives into Gator's demands for the credit of the swim wear, and Mitch finally decides to join a detective agency.
During a long, hot, drought-ridden summer day, Logan becomes jealous when Cody begins to flirt with Caroline during and after rescues. Also, Neely wants to break away from manning the switchboard and become a tower lifeguard, in which Stephanie seeks to prevent. Kaye asks Hobie to help volunteer a group of four young blind children she is looking after at a blind school. But things take another turn when a huge brush fire, fuelled by toxic chemicals, traps Hobie and his young blind charges in the hills and Mitch is the only one who can save them.
After a number of unusual circumstances occur around the beaches, including Cody and Neely rescuing two surfer boys that come down with a fever, an environmentalist group comes to Baywatch to protest the dumping of chemicals from the storm drains, and Mitch enlists the Beach Boys for a benefit concert to help out raise money for repairing the storm drains.
Mitch's mother, Irene, arrives in town for a visit and after a series of unusual circumstances, Mitch forces her to see a doctor where she is diagnosed with Alzheimer's disease. But things take another turn when Mitch's mother wanders off during one of her Alzheimer's phases and is soon missing.
C.J. returns to Baywatch after a vacation in Europe and immediately goes on a girls junior lifeguard trip to Catalina with Stephanie, Caroline, and even the devious Neely tags along where they try to teach the girls the values of teamwork after two of them get trapped in an underwater cave.
Hobie's new friend, Isaac, is a frustrated and angry young kid who will do just about anything to get his distant, workaholic father's attention by trying to swim down a dangerous offshore reef cataract called "the shredder."
Logan takes Cody's car without his permission to get to a business dinner, gets into an accident, and claims a hit and run driver was responsible.
Matt Brody returns to Baywatch to try to make up his lost relationship with C.J. But things take an unexpected turn when a group of ruthless modern day pirates take a millionaire couple hostage and place them under water on the wreck of the sunken oil platform with a few hours of air. When Matt and Neely speed by in their Scarab motorboat, the pirates take them hostage as well.
Logan's problems with Caroline begin when he finds an abandoned baby in his lifeguard tower and mistakenly thinks that it's his that one of his many former girlfriends left for him to care for, and Mitch and Hobie have their hands full after volunteering to watch the infant for a while.
Caroline blames herself after a victim drowns after a nighttime rescue. Spurred on by Neely, Caroline takes a walk on the wild side.
After swimmers are attacked by an alligator living in a storm drain, Mitch, Logan and Cody hunt for the creature. C.J., Caroline and Neely compete to become the cover model for Inside Sports magazine.
While vacationing in Mexico, Mitch and his new girlfriend witness an attempted murder and are then hunted by the killers. Country and Western singer Jesse Lee Harris helps Logan and the Baywatch lifeguards raise money to save a ranch that rescues endangered horses.
When Logan is terrorized by a mad man, Caroline dreams that the detectives from TV show, Charlie's Angels, arrive at Baywatch to help him. In her dream, Caroline is Kelly Garrett, C.J. is Jill Munroe and Stephanie is Sabrina.
Hulk Hogan enlists the help of Baywatch to save a youth recreation center from being closed. In a charity match, Hulk challenges fellow wrestler Ric Flair. Stephanie learns she has developed melanoma (skin cancer) from her years of working on the beach.
Mitch's life flashes before him when his parachute fails while sky-surfing. Tabloids follow CJ's relationship with a football player.
Stephanie is recruiting lifeguards for the annual Lifeguard Sailing Regatta where they will compete with the lifeguards of South Bay. Stephanie, Caroline, Cody, Newman and Barnett sign on, including Neely who reveals that she has a personal grudge against the lifeguard in charge of the South Bay team, Kurt Daniels, who was her former boyfriend and Neely is determined to win the race to get back at him at any cost.
Mitch and Caroline help reunite an amnesiac Vietnamese refugee with her American GI father. C.J. and Cody help a wheelchair-bound comedian realise his dream of swimming in the ocean.
Mitch, Stephanie, C.J., Matt, Caroline and Cody travel to Hawaii to train with Hawaiian guards. Once there, Stephanie finds romance with a Hawaiian lifeguard, Logan decides to compete in a surfing competition and a fishing trip becomes dangerous for Mitch and Matt.
Mitch and Matt are saved by Hawaiian islanders. Stephanie helps an unlucky camera man find love. Logan proposes to Caroline.
Kaye is reunited with an old flame, a surfing champion surfer, arrives at Baywatch for a local surfing tournament, however, disaster strikes. Stephanie undergoes surgery for her melanoma as her friends patiently await her fate. Caroline catches Logan with Neely.
While in training for underwater Olympic techniques, Cody and Stephanie find a rare Spanish gold medallion on the ocean floor and Cody becomes obsessed to find more gold, much to C.J.'s chagrin. But things take a turn when a couple of drug smugglers happen by to retrieve a package of cocaine they threw overboard and Cody gets the bends after rescuing Stephanie from the smugglers during a scuffle on the ocean floor.
