Germany, New Year's Eve, 1929: The Master of Ceremonies, or Emcee, welcomes the audience to the Kit Kat Klub, a seedy Berlin nightspot (“Willkommen”). Meanwhile, in a railway car, an aspiring young American writer named Clifford Bradshaw heads towards Berlin in hopes of finding inspiration for a new novel. Cliff meets Ernst Ludwig, a German who appears to be in the smuggling business. When Cliff inadvertently helps him, Ernst recommends a boarding house in Berlin. Fräulein Schneider, the proprietress of the boarding house, offers Cliff a room for one hundred marks. When he hesitates, she accepts half the usual price; years of oppression have left her weary but pragmatic (“So What?).
On his first night in Berlin, Cliff visits the Kit Kat Klub. The Emcee introduces a young English singer named Sally Bowles, who performs a provocative number called “Don’t Tell Mama.” Sally flirts and tries to shock Cliff. Intrigued, Cliff invites her home, but she refuses, explaining that her boyfriend Max, owner of the club, “is most terribly jealous." The telephone on Cliff’s table rings; the guests at the Kit Kat Klub flirt with one another via an internal phone system (“The Telephone Song”).
The next day, as Cliff finishes teaching an English lesson to Ernst, Sally suddenly appears in Cliff's room with her baggage. Max has thrown her out, and she convinces Cliff (and Fräulein Schneider) to let her move in (“Perfectly Marvelous”). The Emcee and two companions sing a bawdy number about cohabitation (“Two Ladies”).
Herr Schultz, a Jewish fruit seller, woos Fräulein Schneider with the gift of a costly pineapple (“It Couldn't Please Me More”). In the Kit Kat Klub, a young waiter starts to sing a song—a patriotic anthem to the Fatherland that slowly descends into a darker, Nazi-inspired march ("Tomorrow Belongs to Me").
Months pass. Cliff is getting nowhere with his novel, but enjoying life with Sally (“Why Should I Wake Up?”) Sally reveals that she is pregnant. After the initial shock, Cliff is excited by the prospect of fatherhood. Ernst arrives and offers Cliff a job smuggling a briefcase into Germany, and Cliff accepts. The Emcee comments on everyone’s need for cash (“Sitting Pretty”).
Meanwhile, Fräulein Schneider has caught one of her boarders, Fräulein Kost, soliciting sailors in her room. Fräulein Kost notes Fräulein Schneider’s hypocrisy; she has seen Herr Schultz spend the night in Fräulein Schneider’s room. To save Fräulein Schneider’s reputation, Herr Schultz declares they are engaged to be wed in three weeks (“Married”).
At the engagement party, Cliff arrives with the suitcase he smuggled for Ernst. Ernst arrives, wearing a swastika armband. With hesitation, Cliff hands off the suitcase and accepts payment. Herr Schultz, enjoying his party, gets a bit tipsy and sings a self-deprecating Yiddish song, “Meeskite.” Ernst decides to leave, but Fräulein Kost lures him back by singing “Tomorrow Belongs To Me.” As Cliff, Sally, Herr Schultz and Fräulein Schneider look on, the entire ensemble joins in singing the Nazi anthem.
The second act begins with the Kit Kat Girls and the Emcee, in drag, dancing in a kick-line that morphs into a goosestep. Fräulein Schneider expresses her concerns about marrying Herr Schultz, but he assuages her fears (“Married” Reprise). Their moment of reconciliation is interrupted by the crash of a brick thrown through the window of Herr Schultz’s shop. At the Kit Kat Klub, the Emcee performs a duet with a female gorilla, explaining that society will not accept their love (“If You Could See Her”). Fräulein Schultz breaks off her engagement to Herr Schultz (“What Would You Do?”).
Cliff decides to take Sally back to America where they can raise the baby together. Sally protests, declaring how wonderful their life in Berlin is, and Cliff sharply tells her to "wake up" and take notice of the growing unrest around them. At the Kit Kat Klub, after another heated argument with Sally, Cliff and Ernst argue, and Ernst's Nazi bodyguards beat Cliff and drag him out. On stage, the Emcee introduces Sally, who enters to perform again, singing that "life is a cabaret, old chum," cementing her decision to live in carefree ignorance ("Cabaret").
The next morning, as Cliff is packing to leave, Herr Schultz explains that he is moving to another boardinghouse, confident that the bad times will soon pass. He understands the German people, he says, because he is a German too. When Sally returns, she reveals that she’s had an abortion; Cliff slaps her. Sally asks Cliff to dedicate his novel to her, and he leaves, heartbroken.
On the train to Paris, Cliff begins to write his novel, reflecting on his experiences: "There was a cabaret, and there was a master of ceremonies... and there was a city called Berlin, in a country called Germany... and it was the end of the world." (“Willkommen” Reprise). In the Kit Kat Klub, the Emcee welcomes the audience (“Willkommen”), but it is now harsh and violent. He sings, "Auf Wiedersehen, à bientôt," followed by a drum roll and cymbal crash.