The musical is set in and around New York City just prior to and following World War I. Ziegfeld Follies star Fanny Brice, awaiting the return of her husband, Nicky Arnstein from prison reflects on their life together, and their story is told as a flashback.

Act I
Fanny is a stage-struck teen who gets her first job in vaudeville. Her mother and her mother’s friend Mrs. Strakosh try to dissuade her from show business because Fanny is not the typical beauty ("If a Girl Isn't Pretty"). But Fanny perseveres ("I'm the Greatest Star") and is helped and encouraged by Eddie Ryan, a dancer she meets in the vaudeville shows. Once Fanny's career takes off, Eddie and Mrs. Brice lament that once she's on Broadway she'll forget about them ("Who Taught Her Everything?"). Fanny performs a supposedly romantic number in the Follies, but she turns it into a classic comic routine, ending the number as a pregnant bride ("His Love Makes Me Beautiful"), causing an uproar.

She meets the sophisticated and handsome Nick Arnstein, who accompanies Fanny to her mother's opening night party on "Henry Street". Fanny is clearly falling in love with Nick, while acknowledging their complex vulnerabilities ("People"). Later they meet in Baltimore and have a private dinner at a swanky restaurant and declare their feelings ("You Are Woman, I Am Man"). Fanny is determined to marry Nick, regardless of his gambling past ("Don't Rain on My Parade").

Act II
They do marry and move to a mansion on Long Island ("Sadie, Sadie"). In the meantime, Mrs. Strakosh and Eddie suggest to Mrs. Brice that she should find a man to marry, now that her daughter is supporting her ("Find Yourself a Man"). Fanny has become a major star with the Ziegfeld Follies ("Rat-Tat-Tat-Tat"). Nick asks Ziegfeld to invest in a gambling casino, but although Ziegfeld passes, Fanny insists on investing. When the venture fails and they lose their money, Fanny tries to make light of it, which propels Nick to get involved in a shady bond deal, resulting in his arrest for embezzlement. Fanny feels helpless but stronger than ever in her love for him ("The Music That Makes Me Dance").

In the present, Fanny is waiting for Nick to arrive and has time to reflect on her situation. Nick arrives, newly released from prison, and he and Fanny decide to separate. She is heartbroken, but resolves to pick up her life again ("Don't Rain on My Parade (Reprise)").