At the 1970 Tony Awards, seasoned theater and film star Margo Channing presents the Best Actress trophy to newcomer Eve Harrington, who graciously thanks "my producer, my director, my writer, and above all… Margo Channing." In flashback, Margo recalls the opening night, less than two years before, when Eve first entered her life.
After Margo’s successful opening performance, admirers crowd her dressing room and fill the air with "Backstage Babble." Eve Harrington, a young fan who “spent her last penny” watching every preview just to see Margo, is ushered into the star’s dressing room. Shy and modestly dressed, Eve recounts her bleak and difficult past, congratulates Margo, and thanks her for “lighting up” her life. Charmed, Margo invites Eve to stay and celebrate.
Margo’s fiancé, the show’s director Bill Sampson, has to fly to Rome to direct a movie. Margo begs him to stay, but Bill lovingly tells her he’ll return soon ("Think How It's Gonna Be"). Margo dreads facing the opening night party alone. Seeking a good time, she persuades Duane, her gay hairdresser, to take her and Eve to a gay nightclub in Greenwich Village ("But Alive"). The lively evening ends back at Margo's apartment where Eve dubs it "The Best Night of My Life." Alone in her room, Margo watches one of her old movies on TV, sarcastically commenting on her advancing age ("Who's That Girl?")
Four months later, Eve has become Margo's indispensable assistant, impressing Margo's close friends, including her producer, Howard Benedict. Howard takes Eve to Joe Allen’s, a gypsy hangout. "Gypsy," Howard explains, "is the name dancers affectionately give themselves as they go camping from show to show." The gypsies, led by Bonnie, celebrate their lives in show business ("Applause").
Late that night, after a phone call from Bill in Rome, Margo longingly wishes he would "Hurry Back." Bill does return two weeks later, but at his welcome-home party, Margo grows jealous of Bill’s flirtatious relationship with Eve, leading to a disastrous evening ("Fasten Your Seat Belts").
Over time, Eve, continuing as Margo's ever-present assistant, memorizes all of Margo's lines, and she contrives to get herself hired as Margo's understudy. Margo, feeling betrayed and threatened, bitterly denounces Eve’s treachery ("Welcome to the Theatre”). Bill, shocked by Margo’s behavior, accuses her of paranoia. After a bitter fight, they end their relationship, and Margo finds herself alone on an empty stage.
Margo is visiting her friends, playwright Buzz Richards and his wife Karen, in their Connecticut home (“Inner Thoughts”). Karen, thinking Margo behaved unfairly to Eve, arranges for Margo to miss a performance; she drains the car's gas tank to delay their return to New York. Stuck in the country for the night, they express their warm feelings as "Good Friends." Back in New York, Eve gives a triumphant performance in Margo's role. After the show, Eve flirts with Bill, but he resists.
Howard again takes Eve to Joe Allen’s, but Eve snubs Bonnie and her friends, who do a scathing parody of the girl who became an overnight star ("She's No Longer a Gypsy").
While filming a TV commercial, Margo fumes over a nasty newspaper interview in which Eve has bashed “mature actresses.” Bill, realizing what Eve's true intentions have been, rushes back to reconcile with Margo ("One of a Kind"). Margo, however, remains too focused on her career to think about Bill (“Think How It’s Gonna Be” Reprise).
Eve, who has begun having an affair with Buzz, delights in her successful rise to the top ("One Hallowe'en"). But Howard interrupts her private celebration to reveal he’s learned the truth; Eve lied about her life story, and despite her string of affairs, she remains married to a man serving in Vietnam. When Eve curses him, Howard slaps her. Threatening to reveal the truth, he brutally orders Eve to end her affair with Buzz and remain with him exclusively.
Karen, who has learned about her husband’s affair with Eve, apologizes to Margo. Margo immediately forgives her, explaining that Eve will undoubtedly wind up empty and alone. Margo suddenly realizes that Eve’s treachery has given her an opportunity to find "Something Greater” for herself, and she ardently reunites with Bill. In the finale, Margo and Bill join with the entire company, asking, "Why do we live this crazy life?" Answer: "Applause."