A victory over Bolton Wanderers, combined with both the other teams being held to draws, meant that Gillingham finished in fifth place and qualified for the play-offs.

[5][6] Mark Weatherly took over as team captain, replacing Keith Oakes, who was only named as a substitute for the opening game of the season and left the club soon afterwards to join Fulham.

In late June, chairman Charles Cox announced that he had dismissed three directors from their posts; the following day, the ousted trio gave an interview to the press and claimed that under his chairmanship the club's debt had reached £700,000 and that it faced the threat of a potential liquidation order from the Inland Revenue.

The directors then issued a statement to Gillingham supporters stating that the club's finances were under control and that money would be available to manager Peacock to sign new players in anticipation of another challenge for promotion.

[12] The following month, Gillingham signed Howard Pritchard, a winger who had made one appearance for the Welsh national team in 1985, from Bristol City for a fee of £22,500.

[15] Defender Paul Haylock signed for £25,000 from Norwich City, having rejected a new contract shortly after helping the team win the Second Division championship.

[19] The team retained the first-choice kit worn in the previous season of blue shirts with a white panel down each side.

The away kit, to be worn in the event of a clash of colours with the home team, changed from plain red to white with a blue zig-zag band across the chest.

[20][21][22][23] The team's first game of the season was an away match against Newport County; Haylock, Pearce, Pritchard and Quow all made their debuts in a 2–1 victory.

[24] The team's unbeaten run in the league extended to six games with a goalless draw against Middlesbrough and 2–0 wins against both York City and Brentford, before the first defeat of the season came against Mansfield Town.

[24] Colin Greenall, a highly rated defender who had been signed from Blackpool for £40,000 at the start of September, made his debut in the Middlesbrough game.

[9] The unbeaten run came to an end with a 2–0 defeat away to Doncaster Rovers on 7 November, but the team then won 3–1 against fellow promotion-chasers Notts County, a game in which Shearer scored twice.

[24] The game against Swindon, regarded by fans as one of Gillingham's rivals since the 1970s,[35] drew an attendance of 9,982, more than 4,000 higher than that at any other match at Priestfield to that point of the season.

Pritchard scored a hat-trick before half-time in a 4–0 victory which brought the team to within one point of league leaders Middlesbrough, who lost away to York City.

[24] In February, Shearer sustained an injury, so Peacock signed Colin Gordon on loan from Wimbledon; the striker scored twice in four games before returning to his parent club.

[39][40] In March, Gillingham won three consecutive league matches for the first time since November, beating Carlisle United, Darlington, and Bournemouth.

[24] Experienced defender Les Berry joined Gillingham from Brighton & Hove Albion during March; he made his debut in an away defeat to Bury at the end of the month and was an ever-present for the remainder of the season.

[50][51] The final against Swindon Town was also played over two legs and again the first match took place at Priestfield, where the attendance of 16,775 was the largest crowd of the season at the stadium.

[53] The game remained goal-less until the 81st minute when Smith scored following a free kick from Quow to give Gillingham a single-goal lead going into the second leg.

[54] Unlike in the semi-final, away goals were not used as a tiebreaker in the final; instead the rules stated that, in the event of the scores finishing level after the two legs, a replay would take place at a neutral stadium.

Results[28] Gillingham entered the 1986–87 Football League Cup in the first round, being drawn against Northampton Town of the Fourth Division.

[67] Although Gillingham managed to hold their First Division opponents to a 1–1 draw at Priestfield in the second leg, they lost 7–1 on aggregate and were eliminated from the League Cup.

Goals from Smith and Cascarino gave Gillingham a 2–0 win in front of 1,984 fans, the smallest crowd to attend a match at Priestfield during the season.

[28][71] In the southern section quarter-final, Gillingham played Port Vale; the match finished 3–3 after extra time, meaning that a penalty shoot-out was required to determine which team would progress to the next round.

[72][73] Now just two wins away from the final, Gillingham's next opponents were fellow Third Division promotion challengers Bristol City; it was the second consecutive season in which the two teams had met at this stage of the competition.

[74] The attendance of 10,540 at Bristol City's home stadium, Ashton Gate, was the largest crowd in front of which Gillingham had played up to that point in the season.

[28] Gillingham lost 2–0, meaning that their participation in the Associate Members' Cup was ended by Bristol City for the second season in a row.

[57] He also rued the absence of Shearer for parts of the season, contending that if the Scottish striker had been fit throughout, his goalscoring partnership with Cascarino would have secured an automatic promotion place.

[80] Robinson, who had been a regular starter in the first half of the season but featured less frequently in the latter stages, also moved on, joining Southend United for £25,000.