At the end of the month, Benny the Dip was moved up in class to run in the Group Two Royal Lodge Stakes at Ascot for which he was made 9/4 favourite. Ridden on this occasion by Walter Swinburn, he ran on strongly in the closing stages to again defeat Desert Story, this time by three-quarters of a length, with the future Group One winners Medaaly and Air Express unplaced. On his final start of the year, Benny the Dip was made 11/10 favourite for the Group One Racing Post Trophy at Doncaster, but could finish only third behind Medaaly and Poteen. Benny the Dip was prepared for the 1997 Derby by running in two recognised trial races. On 26 April he started favourite for the Classic Trial Stakes at Sandown and finished second, failing to concede two pounds to Voyager's Quest, with Silver Patriarch a head behind in third. After the race he appeared to be a sick horse; Gosden said that he was coughing and "full of mucus". He recovered quickly however, and in May he led from the start in the Dante Stakes at York confirming his best two-year-old form by beating Desert Story by two and a half lengths with Medaaly unplaced. Richard Edmondson, writing in "The Independent" described the win as "fluent", while Gosden explained the tactics by saying that "we went out there to see if he could stay and he outstayed them." At Epsom on 7 June Benny the Dip, started the 11/1 third favourite in a field of thirteen for the Derby. He was ridden in the race by Willie Ryan, a journeyman jockey who had been given the ride when both Olivier Peslier, who had ridden him at York, and Frankie Dettori, were unavailable. The 2000 Guineas winner Entrepreneur was made odds-on favourite, while Silver Patriarch, ridden by the veteran Pat Eddery was the 6/1 second choice. Ryan tracked the leaders before sending Benny the Dip past Crystal Hearted and into the lead half a mile from the finish. In the straight, Benny the Dip went six lengths clear of his rivals two furlongs from the finish, but was then strongly challenged in the closing stages by Silver Patriarch. The grey colt appeared to catch the leader a few yards from the finish, but Benny the Dip produced a final effort ("he dug deep", commented Ryan) and the two colts crossed the line together. After a delay, the result of the photo finish revealed that Benny the Dip had held on to win the race by a short head.