Gunnar St. Clair met James and Barbara Stenbeck at the funeral of James's brother, Lars. A handsome, adventurous man, Gunnar told the Stenbecks an amazing tale: he was James's long lost first cousin! Gunnar stated that the Stenbeck family maid, Greta Aldrin, revealed that she placed him at the St. Clair or phage under orders from James's father, who wanted his orphaned nephew out of his home. While James was skeptical of the story and ordered an immediate investigation, Barbara was intrigued by Gunnar.

After the funeral, Gunnar followed the Stenbecks to Oakdale where he began to form a close relationship with Barbara who Gunnar felt was stuck in an unhappy marriage. The feeling was mutual and, tired of James's domineering ways, Barbara accepted Gunnar's marriage proposal and made plans to leave James. Unfortunately, James couldn't let that happen, since he only controlled the Stenbeck fortune if he had custody of Paul, his son. To ensure that he'd get custody, he proceeded to gaslight Barbara so that she'd have to be institutionalized. His plan was foiled however and Gunnar, with help from psychiatrist Dr. Zachary Stone, was able to get Barbara released. Now desperate to get rid of Barbara, James tried to kill her, only again to have Gunnar come to the rescue.

It was about this time that Gunnar learned that Greta Aldrin lied to him. While it was true that he was a Stenbeck, James wasn't: James was Greta's son who she switched at birth with Gunnar! The true heir to the Stenbeck fortune, Gunnar was free to marry Barbara and used his wealth to help the children at St. Clair Orphanage.

Not long after, a man named Burke Donovan came to town who plotted with James to destroy Gunnar. Apparently Gunnar had an affair with Burke's wife, Nicole, shortly before Burke and Nicole married. Later, Nicole died giving birth to Gunnar's son, Dusty. Though Burke eventually set aside his plan to destroy Gunnar, James was determined to get back the family fortune and tried to kill both Gunnar and Dusty. After failing to murder Gunnar and Dusty by arson, James hijacked the jet they were in. Though Gunnar was successful in saving them, in the struggle, James apparently fell to his death, despite Gunnar's attempt to save him.

Though finally free of Stenbeck, Gunnar had to deal with Paul, who blamed Gunnar for his father's death. To spare Paul, Gunnar and Barbara separated for a time. However, when they finally got together, Gunnar began acting distant which led Barbara to think that he was having an affair. Later, with encouragement from his doctor, John Dixon, Gunnar told Barbara the truth: he was suffering from a terminal blood disease. Though Barbara remained supportive, Gunnar didn't want her to watch him die and set out to travel the world in a hot-air balloon. Later, he was found dead in Australia.