Act I
Auditions for 1933's newest show, Pretty Lady, are nearly over when Peggy Sawyer, fresh off the bus from Allentown, Pennsylvania, arrives in New York City with valise in hand. Billy Lawlor, already cast as one of the juvenile leads, notices her and hopes to charm her into accepting a date with him ("Young and Healthy"). He informs her she has missed the audition but he can help her bypass that process, but choreographer Andy Lee has no time for Billy's latest conquest and tells her, "Amscray, toots." Embarrassed and flustered, she rushes off, only to run into director Julian Marsh. One-time star Dorothy Brock, indignant at being asked to audition for a role, is reassured by co-writer and producer Bert Barry that he merely wants to make sure the songs are in her key ("Shadow Waltz"). Despite feeling she is a prima donna past her prime, Marsh agrees to cast her in order to get financial backing from her wealthy beau, Abner Dillon. Outside the theatre, co-writer and producer Maggie Jones and chorus girls Ann "Anytime Annie" Reilly, Phyllis Dale, and Lorraine Flemming take pity on Peggy and invite her to join them for lunch and some advice. They encourage her to show them a dance routine that is witnessed by Julian, who decides there might be room for one more chorus girl after all ("Go Into Your Dance").

Dorothy and Billy rehearse a kissing scene, but Abner refuses to put money into a show where he has to watch Dorothy kiss someone else. The kiss is removed from Pretty Lady ("You're Getting to be a Habit With Me"). Peggy faints and is taken to Dorothy's dressing room. Pat Denning (Dorothy's secret long-term boyfriend and former vaudeville partner) is there and tries to help her. Dorothy finds them there together and, assuming they are having an affair, blows up at them. Julian overhears the argument and, fearing that Abner will pull funding for the show, decides to end the affair between them. A phone call to an unsavory acquaintance brings Pat a visit from a couple of thugs who convince him to break it off with her. The show's cast then departs to Arch Street Theatre in Philadelphia, for the out-of-town tryout ("Getting Out of Town").

The scenery and costumes will not arrive on time, but the cast begins their dress rehearsal regardless ("Dames/Keep Young and Beautiful/Dames (Reprise)"). Peggy asks Julian if he will be attending a planned party, and he accepts because he is attracted to her. At the party, a drunk Dorothy, who misses Pat, tells Abner she was only with him because of his money and breaks up with him. Abner wants to close the show, but he is convinced to keep it running. Dorothy finds Pat, but he is once again driven off by Julian at the hands of the gangsters. Peggy tries to warn Pat, and Dorothy catches them together, becoming greatly upset ("I Only Have Eyes For You" and "Boulevard of Broken Dreams").

"Pretty Lady" finally opens ("We're in the Money"), but someone bumps into Peggy, which causes her to knock over Dorothy. When Dorothy cannot get up, an angered Julian immediately fires Peggy, and tells the audience that the show is canceled.

Act II
Dorothy's ankle is broken, and the show may close, but the chorus kids will not give up ("Sunny Side to Every Situation"). The chorus kids, certain Peggy could fill the lead role, find Julian and tell him that she's a fresh young face who can sing and dance circles around Dorothy. He decides it is worth a shot and rushes off to the train station to catch her before she departs. At Philadelphia's Broad Street Station, Julian apologizes to Peggy and asks her to stay and star in the show, but she responds that she has had enough of show business and wants to go home to Allentown. Dumbfounded, he tries to coax her with the words "Come on along and listen to the lullaby of Broadway..." After the cast joins him in the serenade, she decides to accept his offer ("Lullaby of Broadway"). Forced to learn the part in two days, Peggy is about to mentally collapse when Dorothy, who has been watching the rehearsals, unexpectedly visits her and realizes that beneath her nervous exterior, Peggy is good, "maybe even better than I would have been". She even offers a little friendly advice on how to perform the last song, "About a Quarter to Nine."

It is time for the curtain to rise again ("Shuffle Off to Buffalo"). The opening night curtain is about to rise when Julian, now completely in love with Peggy, stops by for a last minute lip-lock and pep talk in which he utters the now iconic line, "You're going out there a youngster, but you've got to come back a star!" The show is a huge success sure to catapult her into stardom ("42nd Street"). In addition, although she is invited to and expected to attend the official opening night party, she decides to go to the chorus one instead. Julian is left alone onstage with only a single ghost light casting his huge shadow on the back wall. He quietly begins to sing, "Come and meet those dancing feet on the avenue I'm taking you to...42nd Street" ("42nd Street (Reprise)").