Mitch has just been promoted to lieutenant. He and his former wife Gayle have an argument over her desire to have full custody of Hobie, for which she informs Mitch she has filed suit. Eddie Kramer is the top rookie in the rookie class of '89, and Shauni McClain is one of the last ones to qualify. An Australian immigrant, Trevor Cole, works as a lifeguard at a local beach club that occupies a patch of the same beach as Baywatch, but alienates Mitch with his arrogant, competitive manner. During a rescue, Mitch urges Trevor to rescue two children that he's closer to, but Trevor instead rescues an attractive woman instead of two boys who were closer to him, and dismisses Mitch's subsequent criticism as soreness on Mitch's part that Trevor "outswam" him.
Assigned to a lifeguard boat, Shauni is involved in the rescue of a woman and her young daughter, but when ordered to perform CPR on the girl, she freezes, unable to act. Though ridden with guilt over this, Jill consoles her, encouraging her that she will do better, and letting her know that there will always be someone to back her up.
Craig rescues a girl named Laurie Harris, who attempts suicide by jumping off a pier. She develops an infatuation with him as a result, and follows Craig around the whole day. When Craig is about to close his tower, Laurie appears, disrobes and tries to seduce him, but Craig rebuffs her, just as a fellow lifeguard, Owen, arrives at the tower in a pickup.
Later at Mitch's party, Laurie tells Gina that she and Craig had sex together. Later when Craig and Gina find Laurie in a tower, with bruises on her neck, which she explains were inflicted upon her by her father. Craig and Gina let her spend the night in their house. The next morning Craig pays Mrs. Harris a visit and finds out that Laurie's father has been dead for ten years. Laurie has just been released from the mental hospital and Craig suddenly realizes that Gina might be in danger. Craig finds Gina and Laurie under the pier where, Laurie has cut Gina on her wrist with a knife, and is trying to kill her. Craig manages to wrestle the knife away from her and subdue her.
Mitch's longtime lifeguard friend Al, who was not in the water for the rescue as soon as the other lifeguards, is told that he is being taken off the beach because he is past his prime. In order to cheer Hobie up, Al takes Hobie on a fishing trip. An accidental propane explosion in the ship's kitchen destroys the ship. While awaiting rescue, Al tries to calm the other survivors as they cling to debris in the water. Among the rescuers is Shauni, who must overcome her fear, and Mitch who, along with Al, must rescue Hobie, who is trapped underneath the capsized boat on the ocean floor. After Mitch swims down to the boat to investigate, he returns to a rescue boat for scuba gear, while Al dives down into the boat and reaches the survivors through a hole in the boat's hull. Mitch and Al manage to rescue the survivors, but in the process, Al's legs are tangled in a fishing net, and he drowns before resurfacing. Despite the efforts of Mitch, who performs CPR on him, Al dies. Baywatch arranges a funeral at sea for Al, at which Mitch eulogizes his fallen friend.