Faith Roberts worked as a waitress and had been raised in Starlight, Texas by Bonnie Roberts. Meanwhile, Ridge Forrester had been married to Caroline Spencer, who died of leukemia, and was now married to Taylor Hayes. Taylor's ex-husband, Blake Hayes, wanted Taylor back and discovered that Caroline had an identical twin sister who had been kidnapped as a baby. He found Faith in Texas and revealed to her that she was really Karen Spencer, heiress to the Spencer Publications conglomerate. Blake dyed Karen's hair to make her look like Caroline so she could lure Ridge away from Taylor. Karen's father, Bill Spencer, Sr., was stunned to see Caroline's twin and confirmed Karen's identity by comparing her fingerprints to those taken from her crib as an infant.Ridge was shocked to see this woman who looked just like Caroline, but ultimately only wanted Karen as a friend. A furious Blake bound and gagged Karen when his plan failed, but she managed to get to a phone and called Bill, who rescued Karen with the help of Ridge's brother, Thorne Forrester. Thorne, who had also been married to Caroline, was equally amazed by Karen's likeness and began dating Karen after Blake left town in defeat.
Thorne asked Karen to move in with him at the same time Thorne's estranged wife, Macy Alexander, wanted a reconciliation with Thorne. They all agreed to live in separate bedrooms in Thorne's apartment. But when the Three's Company arrangement wore thin, Karen and Macy got into a huge food fight while preparing Thanksgiving dinner. Thorne admitted he had feelings for both of them and couldn't choose, but Karen won out after Thorne mistakenly believed Macy had taken up with Jake Maclaine. Karen's new life included losing her virginity to Thorne and a leadership position at the ailing Spectra Fashions, in which Bill had just invested a huge amount of cash.
Karen befriended Brooke Logan, who was running Forrester Creations with attorney Connor Davis at her side. After Thorne went back to Macy, Karen also developed a friendship with Connor. Brooke's liaison, Sheila Carter, wanted more power in the company and plotted to get rid of Connor by taking a picture of him kissing Karen at the Bikini Bar. Sheila's plot was foiled when Karen convinced Brooke that Connor was just a friend. Karen enjoyed her time with the Spectra gang, and joined in getting Fabio to make an appearance at Sally Spectra's bachelorette party.
In 1994, Karen started seeing Connor romantically, and insisted he get an HIV test. Connor tested negative, but Karen still wasn't ready to make love, so Connor gave Karen a few extra drinks to get her into bed. Connor felt bad and admitted to Macy that he hadn't used a condom. When Karen heard this from Macy, she decided to teach Connor a lesson by telling him she was pregnant, even though she had used a diaphragm. Connor responded by throwing Karen a surprise wedding. They went as far as exchanging vows before Karen confessed she wasn't actually expecting. Connor wanted time to think before signing the marriage certificate, which would make their union legal, and went on a date with Darla Einstein. Karen was upset and talked to her adoptive mother, Bonnie, who wanted her to come back to Starlight. Karen left Los Angeles, but not before making peace with Connor and restoring Spectra Fashions to Sally.
Karen was not seen again on the B&B canvas until 2009, when Bill Spencer, Sr. died. It was revealed that not only had Karen moved to New York and taken a high-powered position at Spencer Publications, but that she had a half-brother in Bill Spencer, Jr., who relocated to Los Angeles. Karen attended Bill's wedding to Katie Logan later that year, and Katie's surprise vow renewal ceremony in 2011.
Karen had a surprise of her own: a grown-up daughter she named after her late twin sister. Young Caroline was a budding designer that Brooke recruited to work with her son, Rick Forrester, in an attempt to keep Rick away from his scheming ex-wife, Amber Moore. Caroline moved to Los Angeles in 2012 and was soon followed by Karen and her friend, Danielle. Karen insisted that Caroline keep a "family secret" when Thomas Forrester came home with Caroline and kept asking about Caroline's father. But Caroline finally convinced Karen to admit that Danielle was her spouse and Caroline's second mother. Thomas took the news in stride, but Karen was adamant that Bill not discover she had come out as a lesbian, even as Karen arranged to have Danielle interview with Bill for a job at Spencer.With Danielle's encouragement, Karen finally found the courage to come out to Bill. Instead of the homophobia she was sure he'd exhibit, Bill embraced Karen and accepted Danielle into the family. Months later, Karen and Danielle rushed to Caroline's side when she fell over a balcony during an argument with Bill. Caroline swore it was an accident, but Karen, among others, couldn't help wondering if Bill had pushed Caroline.
When Katie staged an intervention because she felt Bill was drinking too much, Karen concurred that she had seen Bill with a glass in his hand more often than was healthy. The intervention ended when Brooke's daughter, Hope Logan, busted into Bill's place with a golf club and exposed his scheme to sabotage her wedding to Bill's son, Liam Cooper Spencer, which included illegally breaking Hope's father out of jail. Karen was shocked to discover the lengths her half-brother would go to when he wanted something.
Katie filed for divorce after learning that Bill had slept with Brooke, and that Brooke had miscarried his baby. After Katie got Bill to give her 1% of Spencer Publications in the settlement, Karen walked in and announced that Bill now only owned 49% of Spencer; with 50%, Karen was now the majority stockholder and had appointed Katie the company's new CEO. Katie's first order of business was to fire Bill and have him removed by security guards! Bill accused Karen of influencing Katie, but Katie insisted the coup was all her idea. Karen had helped Katie accomplish the takeover because she felt Bill deserved it for cheating on Katie. Karen and Danielle knew Katie would make a great CEO, and offered her their full support.