Caroline Spencer was the daughter of Bill Spencer, head of Spencer Publications. Caroline loved Ridge Forrester, heir apparent of design house Forrester Creations. But Bill disapproved of Caroline's relationship with Ridge, and, at their wedding, showed Caroline a picture of Ridge having one last fling with ex-girlfriend Alex Simpson. Caroline collapsed at the altar; in the hospital, she met Brooke Logan, who also had an eye on Ridge. Regardless, Caroline and Brooke became friends, and, when Caroline was raped by Ron Deacon, she accepted Brooke's invitation to stay with Brooke and her family.
Despite the fact that Ridge stood up for her during Ron Deacon's rape trial (he debunked Deacon's attorney's contention that Caroline had consented to sex by insisting that Caroline had wanted to remain a virgin until her wedding night), Caroline began a relationship with Ridge's brother, Thorne Forrester. Seeing that Ridge was moving on with Brooke, Caroline accepted Thorne's proposal of marriage. Caroline soon found out that Brooke and Thorne had intercepted a letter in which Ridge had professed his feelings of love; Caroline married Thorne anyway, with Brooke as her maid of honor. After the wedding, Caroline rejected Brooke's friendship and promised not to tell Ridge about the letter if Brooke stayed away from him. Caroline remained quiet even after Brooke failed to keep out of Ridge's orbit.
One night while very drunk, Caroline thought she was making love to Thorne but in reality slept with Ridge, who had snuck into Caroline's bed as a prank. This further confused Caroline's feelings; however, the stunt also led to a doped-up Thorne shooting Ridge in the head, with no memory of the attack. Caroline was horrified when she found out but assured Thorne's mother, Stephanie Forrester, who tried to keep Thorne out of jail by taking responsibility for the shooting, that she'd keep Thorne from learning the truth. Though Caroline tried to honor her marriage to Thorne, her continuing feelings for Ridge were too strong, and she used her knowledge of the letter Brooke had helped hide to blackmail Brooke into refusing Ridge's marriage proposal. Caroline then divorced Thorne over the objections of Stephanie, who worried that Thorne might commit another violent act over the rejection.
After Thorne had total recall about Ridge's shooting but recovered from the shock without incident, Caroline was free to marry Ridge. Caroline had a sumptuous outdoor wedding, but soon learned she was dying of leukemia. Caroline refused to tell her father, or Ridge, even swearing her oncologist, Taylor Hayes, to secrecy. Caroline also ordered Brooke to keep quiet, but she didn't, and Caroline only realized Ridge knew about her prognosis after a gentle, cryptic conversation. Caroline died in Ridge's arms after a party she threw during which she insisted everyone be good to each other.
Caroline lives on through Karen Spencer, the twin sister she never knew, who named her own daughter Caroline. Caroline's namesake established the Caroline Spencer Cancer Foundation in Caroline's honor.