With the summer vacations about to conclude, Blair reaches the Hamptons with James in tow. Blair is initially cold towards James, but as he divulges his true identity – that of an English Lord by the name Marcus Beaton, Blair finds herself drawn towards him. Meanwhile, Chuck is looking to end Blair’s affair with Marcus, so that he in turn could resurrect his relationship with her. His attempts though turn out to be in vain. Through the entire course of the summer, Serena and Nate form a false bonding between themselves, only to allow Nate to have an affair with Catherine Mason, who’s a much married woman. Now, Nate’s affair with Catherine comes in the way of his relationship with Vanessa, who is aware of the passions brewing between Catherine and Marcus.

Meanwhile, Serena comes into contact with a person she knew briefly from before, called Aaron Rose. In the interim, Eleanor happens to meet Cyrus who is Aaron’s father, and begins dating him. At the ball, Lily who is upset over Bart, shares with Rufus the fact that they both still had feelings for one another. Unfortunately, Chuck overhears this conversation and immediately calls up his father, asking him to rush to the dance. As ill fate would have it, Bart never makes it to the dance, as he ends up dead in a major car crash involving his Limousine. So Chuck proposes to Eleanor which she gladly accepts while Aaron and Serena part ways.

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Lily’s mother has a confession to make – that Lily and Rufus had a child that Rufus knew nothing about. Rufus and Lily now set out in search of their child. Rufus also tells Dan about his sibling but requests him to let Lily do the honors of telling Serena at the opportune time. Dan and Serena start dating each other once more. Rufus and Lily manage to get to the adoptive parents of their son, but in a case of ‘so near yet so far’, they lie to Rufus and Lily, about the boy being dead. Meanwhile, through ‘Gossip Girl’, Serena is now empowered with the knowledge that Dan and she share a sibling.

The return of Chuck’s uncle Jack Bass deems Jack as the one who would henceforth take care of Chuck. Blair is obviously unhappy, and visibly disappointed with such an arrangement. Chuck on the other hand is benefited by the inheritance of his father as well as a 51% share in Bass Industries. Unfortunately for Chuck, he is witnessed by the chairpersons of the company with a group of prostitutes, in his father’s cabin, and so they hand over the reins of the company to Jack. Jack Bass’s long-term plan for Bass Industries disappoints Lily immensely. So she appoints an attorney and persuades Chuck to sign the requisite papers that would render her as his lawful custodian. Jack comes to know of Lily’s activities and in a fit of rage, jails Lily in the powder room at the Opera, and even tries to molest and rape her. Fortunately, Chuck arrives at the scene in the nick of time, and prevents anything majorly untoward from happening. Having realized his folly, Chuck decides to rejoin Lily’s family, and makes her the proprietor of Bass Industries.

Serena and Dan get through into Yale, while Blair is still at the Wait-List stage. Serena is aware of the fact that her turning down Yale’s offer would automatically mean Blair’s entry into it. Blair on the other hand, is unaware that Serena has got through at Yale. In fact, Blair is busy plotting her own ploy of revenge against a new, young teacher, Miss Carr who happened to have given Blair a B. On Serena’s knowledge about this, she informs Blair that she has decided to give Yale the miss, so Blair could easily get through there. As part of her revenge ploy, Blair invites Miss Carr over to the opera. However, the realization soon dawns on Blair that not only did Miss Carr know about the prank, she had even informed the headmistress about it. The headmistress in turn informs Blair that her acceptance at Yale stands suspended and in fact she would now lie under detention. This is when Blair loses her cool completely and declares full-fledged war on Miss Carr. This time, her ploy is to spread a rumor that Dan and Miss Carr are in a relationship, which Blair intends to publicize through Gossip Girl. Immediately, Serena senses something amiss, and Blair is soon discovered to be the perpetrator behind the rumor that is doing the rounds, post Nelly’s confession to the headmistress. Blair is expelled from Yale with immediate effect.

Bringing a twist into the tale, Serena spots Dan and Miss Carr together in a coffee shop, where she observes Dan soothing Miss Carr very closely. At the opportune time and moment, Serena manages to take a picture of the two together, and puts it up for display at a PTA meeting. Miss Carr is immediately fired while Blair is reinstated to Constance Billard. Even though Dan tries to defend himself, ultimately Serena and he break up. Serena meanwhile confesses to Miss Carr that she was the one who took the picture. Dan later visits Miss Carr wherein not only do the two kiss each other, they also end up making love. Now, afraid of a lawsuit being filed, the headmistress decides to accept Miss Carr back and reinstate her at her former position. Once back at her position, the tables have now turned, and it is Miss Carr’s turn to take revenge against Blair. Towards that end, Miss Carr calls up Yale to tell them that Blair had been under detention for hazing a teacher. For a second time, Blair’s acceptance to Yale is annulled and instead Nelly is taken in. Blair is now desperate to know who’s behind the latest round of turmoil, i.e. who’s the one who called up Yale. Meanwhile, Dan and Miss Carr are carrying on their affair like nobody’s business, even having sex in the costume room. But when Dan discovers that it was Miss Carr who called Yale against Blair, he promptly decides to part with her, while even going to the extent of informing Blair that it was Miss Carr who called up Yale about her. Blair is now so upset that she simply tells Miss Carr that she would have to ‘live with it’. At this point, Miss Carr decides to make an exit from the scene, leaving a note for Dan that she would be going back to Iowa.

As a result of a gaffe, Chuck ends up getting invited to a Skull and Bones society meeting, where the original invitee was his father. There he meets Elle whom he quickly gets fixated by. He even gets ready to help this lady escape the country, as she seems to have found herself in trouble herein. Eventually though, the realization dawns on him that she was only looking to use his money as a means to make a quick getaway. As soon as Elle leaves, Chuck goes over to Blair’s place, lying in wait for her. Blair on the other hand, is drinking away all by herself at a bar. Carter Baizen is seated right next to her and in the midst of offering to buy her a drink, manages to place his hand on her knee.