We present time-resolved spectroscopy of the soft X-ray transient XTE J2123-058 in outburst. Spectral coverage of 3700-6700A was achieved spanning two orbits of the binary. The strongest emission lines are HeII 4686A and CIII/NIII 4640A (Bowen blend). Other weak emission lines of HeII and CIV are present and Balmer lines show a complex structure, possibly contaminated by HeII. HeII 4686A and CIII/NIII 4640A show different orbital light curves indicating an origin in different regions. HeII 4686A profiles show a complex multiple S-wave structure. Doppler tomography reveals this emission is not associated with the companion star, and occurs at velocities too low for Keplerian disk material. It can possibly be associated with overflowing or splashing stream material. The optical spectrum approximates a steep blue power-law, consistent with emission on the Rayleigh-Jeans tail of a black body spectrum. Orbital modulations show no wavelength dependence; this is as expected if both disk and companion star are hot enough for the peak of their spectral energy distributions to be in the UV. The hot continuum and presence of high-excitation emission lines indicate strong X-ray heating.