In the fictional town of Rainbow Valley, Missitucky, near Fort Knox, the local sheriff and Buzz Collins, front man for local senator Billboard Rawkins, demand the local sharecroppers pay their taxes or lose their land in a public auction. The sharecroppers want to wait for Woody Mahoney, their union leader, but the Sheriff begins the auction anyway. The Sharecroppers defiantly drag him and Collins off to meet Woody ("This Time of Year").
Finian McLonergan, an elderly Irishman, arrives with his daughter Sharon ("How Are Things in Glocca Morra?"). Finian has stolen a crock of gold from a leprechaun and intends to bury it near Fort Knox, in hopes of making it grow. Woody doesn't have enough money to pay Rawkins, so Finian pays the rest, earning the trust of the sharecroppers ("Look to the Rainbow").
That night, Finian buries the gold and marks the spot, only to be met by Og, the leprechaun he robbed. Og desperately needs the gold back; without it, he is slowly becoming mortal. Sharon and Woody, who come looking for Finian, soon fall for each other ("Old Devil Moon").
Senator Rawkins is buying up land to fight progressive developers. He is not upset with losing Rainbow Valley until two geologists arrive to tell him gold has been detected on it. He vows to drive Finian and the sharecroppers off.
The next morning, Og meets Sharon and shyly confesses his feelings for her ("Something Sort of Grandish"). But Sharon is in love with Woody ("If This Isn't Love"). Og warns Finian not to make wishes near the gold; after three wishes, the gold will vanish forever. Og enlists the local children to help find his gold, promising to get them anything from a magical catalogue ("Something Sort of Grandish” Reprise).
As the sharecroppers sort tobacco leaves, Maude, one of their leaders, laments the unfairness of life ("Necessity"). Senator Rawkins tells Finian and the white sharecroppers that, by living with black people, they are breaking the law. Outraged at the Senator's bigotry, Sharon tells him, “I wish to God you were black!” Because Sharon was standing over the gold, the Senator is transformed. The unknowing Sherriff chases him off the property. Woody brings news that there is gold on their land, and the Shears-Robust shipping company has offered them all a free charge account. Insisting that credit is better than wealth, Woody and Finian tell them to use their new free credit rather than dig the gold. The group celebrates "That Great Come-And-Get-It Day".
The sharecroppers begin unpacking extravagant gifts to themselves from their new accounts. Sharon and Finian celebrate the end of class-distinction that comes with wealth ("When the Idle Poor Become the Idle Rich"). Shears and Robust show up wondering when the gold will be discovered that will pay for the credit. Woody and Finian explain that there is no need to dig the gold up, since the news has led to massive investment in their tobacco label. Buzz and the Sheriff, however, accuse Sharon of using witchcraft to transform the Senator. Woody orders them off. He and Sharon agree to marry ("Old Devil Moon” Reprise). Woody’s sister, Susan the Silent, watches them, dances by herself, and discovers the hidden gold ("Dance of the Hidden Crock"). She takes the gold for herself and hides it.
Meanwhile, Senator Rawkins is hiding in the woods. He meets Og and explains what happened to him. Og decides what the Senator needs is a new inside rather than a new outside. He uses his own magic to make the Senator a nicer person ("Fiddle Faddle"). In his new persona, Rawkins falls in with a group of black gospel singers looking for a fourth man ("The Begat"); by chance, they are all going to sing at Woody and Sharon's wedding. The wedding is interrupted by Buzz and the Sheriff, who have come to arrest her for witchcraft. The Senator tries to defend them, but as a black man the Sheriff has no need to heed him. Finian steps in, promising Sharon can change the Senator back. He dismisses everyone, intending to use the Crock to undo her wish, but finds the crock gone.
Og, now nearly human, looks for Sharon to tell her his feelings. He finds Susan instead, but realizes he is also attracted to her. He wonders if all human love is so fickle ("When I'm Not Near the Girl I Love"). Finian finds them and tells them Sharon is in danger. When Og reveals he doesn't have the gold, Finian runs off in despair. Susan knows where the gold is, but can't speak. Frustrated, Og wishes she could talk, not knowing the gold is under his feet. Susan speaks, and tells him she loves him. Og realizes there is only one wish left, and if he uses it to save Sharon he cannot be a leprechaun again. He is unsure what to do until Susan kisses him. Deciding being human isn't so bad, Og returns the Senator to his original appearance.
The Senator promises to be a better representative to the people, and the Sharecroppers welcome Og and the now-verbal Susan ("If This Isn't Love” Reprise). Finian, however, has lost the crock and his hope of getting rich. Seeing that Sharon and Og have found their dreams, he goes off again in search of his own rainbow, saying “Maybe there's no pot of gold at the end of it, but there's a beautiful new world under it.” The cast tells him goodbye, promising to see him in Glocca Morra ("Finale").