Colin speaks out against alcohol after a teenager is found drunk. The bootleggers in turn set light to the church. At the same time, Grady Hocking and his two sons, George and Greg, have come to town.

The arrival of a family of Russian refugees in Paterson's Ridge creates friction with the locals, just as the completion of Colin's new church is uniting the community.

Matt and Kathleen fight a land-grabbing politician's scheme to drive the farmers from the high-country after news breaks that their high-country grazing leases are about to expire.

While going to fish one day, Colin and Rob discover the stagecoach, which tumbled down a cliff. The only survivors are a woman and a baby. The woman, Ruth Whitney, claims that the baby is not hers, but nobody in Paterson's Ridge believes her.

Matt suggests to Jack Kelly that he work for Kathleen in exchange for food and board. Reluctantly, he agrees to do so. Jack and Kathleen argue from the start, but obviously need one another. Oliver Blackwood continues his efforts in trying to undermine Kathleen's hold on her land. Rob and Luke court danger to win Victoria's affections, chasing down a wild stallion. Matt must intervene when Danni is severely punished by the new teacher.

Matt McGregor finds he has a competitor for Kathleen's affections when his mate, Steve Page, arrives at Paterson's Ridge and becomes smitten with the fiery Kathleen. Kathleen's new Braham breaks loose, and she gets caught in the middle of a sudden storm looking for it. When she hasn't arrived back by nightfall, Matt rides off in search of her. Meawnile, Luke starts prospecting for gold on his father's old claim.

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The arrival of a travelling boxing troupe in Paterson's Ridge, led by "Dandy" Jim O'Rourke, has the community, including the McGregors, ready to try their hand. A visiting pianist is suspected of being a con man.

Joanna Walker is determined to find her half-brother and Kathleen O'Neil agrees to accompany her in the search.

A young Aboriginal boy must choose between his heritage and an education when his father arrives in Paterson's Ridge.

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Danni McGregor and Michael ride into a herd of brumbies. In the confusion Danni is thrown and falls into a disused mine shaft. Michael goes for help, but becomes lost in dense scrub and falls unconcious from cold and shock. Anita sees Matt's obvious affection for Kathleen and realises trying to rekindle their lost love could be useless. News of Luke's gold strike spreads.

Oliver Blackwood learns Luke's mine is worthless and tricks Luke into buying him out. Luke discovers the truth but it is too late and he is forced to abandon the mine and lose his mansion. The bank threatens to foreclose on Matt forcing him to muster his cattle through Blackwood's property to get to the cattle sales, but Blackwood is determined to stop him. Luke is knocked unconscious after an explosion in his gold mine.

Poor railroad workers live in deplorable conditions, and Kathleen sets out to help them and their families.

Ruth is forced to make a difficult decision after she is offered a position with the Associated Press in America. Ruth's article on the founding father of Paterson's Ridge threatens to unearth a Blackwood family secret.

Emily goes into labour while in the cabin shortly after Matt finds her with Nancy. Colin gets ready to fight in the duel, writing a farewell letter to Emily.

Lawlessness abounds as miners stream into Paterson's Ridge. Anita Hargreaves invites Luke to dinner. Colin McGregor proposes to his organist Emily Cornish. Rob and Luke, in defending Victoria Blackwood's honour, get into a punch up with some miners, and Matt finds the courage to ask Kathleen to go with him to the Mountain Ball. Meanwhile, Frank Blackwood plans to poison Kathleen's cattle to force her from her land.

Oliver Blackwood schemes to take over Matt's land. Frank Blackwood is jealous of his father's business dealings with Luke. Herbert arrives home with some local dignitaries to find Anita and Luke in a passionate embrace. The next day their liaison is all over town, and Anita arrives at the Mountain Ball on Luke's arm. Oliver Blackwood asks Anita to share his life at Balmoral, but before she can answer, a shot rings out and he falls to the floor.

A drought causes a flood of hostility between the McGregors and the Blackwoods over a shared boundary creek when Frank changes the course of the stream.

The British army comes to town and attempts to recruit the locals using some dubious methods. Much to Matt's dismay, Rob is tempted to enlist. However, Rob finds himself conflicted about leaving because of his growing feelings for Ruth.

The residents of Paterson's Ridge are given a look into the future when a hot-air balloon crashes. The pilot charms the townspeople - especially Michael, who is inspired to build a glider.

Matt and Kathleen intervene and devise a plan to save the town's sawmill from bankruptcy.

Victoria Blackwood and her chaperone return from shopping in Melbourne, but their train journey ends when the tracks are washed away in heavy rain. Rob is sent to collect them and shares a passionate kiss with Victoria. Matt and Kathleen have a disagreement about Sean Carney's education and Emily donates a new organ to Colin's church.

A trapper wanders into town with news about Joanna's father.

Danni McGregor secretly enters the electrifying and dangerous Snowy River cross-country race — an annual race created in honour of her father's famous ride years before. Then, a mysterious American appears, determined not only to win the race at any cost, but also to challenge Matt McGregor himself in the original death-filled ride down the mountainside.