Donna is upset by her mother's decision to sell the house. David hangs out with her at the apartment, and they both fall asleep on the couch. Donna pulls away from a kiss because she doesn't want to risk their friendship by becoming romantically involved. Felice and the gang grant Donna's wish for one final Christmas at the house. Steve, Janet and Felice set up an unwitting Donna and David on a date. They finally decide to get back together, and share a passionate kiss. Kelly and Matt set an August wedding date. Dylan infuriates Kelly with his wedding gift, a trip around the world for two. Matt considers a job offer in Seattle, and Kelly agrees to go with him. Although he fails to get the job, Matt suggests that they move anyway. Dylan unsuccessfully pleads with Kelly for another chance at their relationship. A man offers to purchase The Beat for $750,000. Janet would continue to work at the paper, while Steve would stay home with Maddy. They decide to give this arrangement a trial run. Steve initially feels emasculated, but comes to enjoy spending time with his daughter. Janet fears that she is missing out on the major events in Maddy's life. Noah helps convince Ellen's mother to let her spend time with her daughter, Caitlin. Ellen tells Noah that she doesn't have time to date him, as she must concentrate on being a good mother.

David expresses his feelings for Donna by writing her a giant love note in the sand. He is understanding about her reluctance to accept his proposal. He believes that she is having trouble reconciling her dreams of the perfect marriage with reality. A talk with Janet prompts Donna to realize that her expectations have been unreasonable. She tells David that she loves him and wants to spend the rest of her life with him. Dylan graduates from California University. Matt considers moving to New York to help her sister-in-law raise his child (for whom he was the surrogate father). He declares that he will stay in Los Angeles for Kelly. Kelly, unable to fight her feelings for Dylan, calls off the engagement. Matt assumes that Dylan told her about his indiscretion in the desert. Kelly lashes out at Dylan for failing to disclose this information. Janet is distressed to learn that she must compete for the editorship of Nouveau, which Yoffe had led her to believe was already hers. She feels left out as Steve strengthens his bond with Maddy. Ellen asks Noah for a commitment in order to protect Caitlin from potential heartache. He declines because the relationship is moving too quickly for him.