Introduces the McGregor family and the people of Paterson's Ridge. The 25th Annual Man From Snowy River Horse Race takes place, and Danni McGregor wins, despite her father Matt's order for her not to enter the race. Meanwhile, a mysterious man arrives from America. He soon reveals his identity to be Luke McGregor, the son of Matt's older brother, Alec, the McGregor family black sheep.
Thomas Pascoe is appointed the new school teacher, but Danni takes a dislike to him instantly as he makes fun of a student. Not only that, but he has a cane. Victoria continues to play Luke and Robbie off each other by using her high-spirited horse Prince as the bait.
A friend of Matt's, Steve Page, comes to town and falls for Kathleen. He strains his friendship with Matt when he asks Kathleen to return with him to Melbourne. At the church Colin has both Danni and Emily Cornish to help him do up the church.
Oliver and Luke strike a partnership when Luke needs money to look for the gold. Luke agrees to Frank having 20 percent and Frank has to mine. Victoria is stranded when the train tracks are washed out. Rob goes to get the organ for Emily, which is a present for Colin and the church. However, when Victoria and Rob are alone, can he supress his feelings any longer?
George Elliott, the banker, has a heart attack and dies just as his daughter Anita Hargraves is returning from San Francisco.
Anita wants revenge on Matt for breaking her heart and forces her brother Herbert to call in the mortgage.
Luke finds a gold vein in Alec's Foley and employs Chen as his foreman.
The news of Luke's gold strike has spread and people flock to Paterson's Ridge. Hoping for their own bit of gold, Danni and Michael set out, but when an accident occurs it leaves Danni at the bottom of an old mine shaft. Kathleen meanwhile is jealous over Matt and Anita, but not all is what it seems.
The railway is coming and the Blackwood's discover it should go right through Kathleen's land. With the help of miners, they set about poisoning her cattle in an effort to force her out. Meanwhile, Victoria loses in the Luke vs Rob situation when Luke starts to fall in love with Anita. However, Anita only expresses an interest in Luke because she believes she'll succeed in making Matt jealous.
The Mountain Ball has arrived and Victoria still hasn't decided between Rob and Luke - so they make the decision for her.
At the Ball, Luke is accused of trying to kill Oliver when he is shot while talking to Anita.
Harry Roebuck, a bushranger, holds up the stage coach which Frank, Victoria, Herbert and Anita are on - stealing all of Luke's gold. As the bushranger goes to leave, Herbert shoots, hitting Roebuck in the leg. Roebuck vows revenge on Herbert.
Frank is ready to hang two men he accuses of being cattle rustlers - which they deny. Matt spares them and Kevin and Brian go to work at Langara. Brian falls in love with Danni and she with him. Emily and Colin's wedding day arrives.
The election draws near and Luke continues to campaign with Oliver's backing - until Luke proposes to Victoria. Victoria accepts the proposal but she is forced to make a difficult decision by her father. Meanwhile, gold at the mine has slowed down and Frank is concerned the gold is running out.
Kathleen and Matt both end up in Melbourne for matters concerning the government. Matt is there to be sworn in as a new member of parliament - Kathleen to fight them about taking her home and land for the railway. Victoria leaves to go to England under her father's order.
Herbert Elliott is forced by Oliver to call in both Luke's and Matt's debts. While nothing can be done to help Luke financially, Jack goes to see him to tell him the real story of his father. In order to save Langara, Matt and his children must drive the cattle to market - across Blackwood land.