In New York City, during the challenging times of the Great Depression, stage director Julian Marsh finds himself in dire straits as his theater suffers from low attendance, leaving him completely broke. He eagerly seizes the chance to direct the musical comedy Pretty Lady, written by Jones and Barry. With his health seemingly failing—most likely due to cancer—Marsh hopes that the success of this show will secure his financial future for the remaining days of his life.
The auditions yield two standout performers for the leading roles: Dorothy Brock, chosen by the show's producer, Abner Dillon, and Billy Lawler, a talented juvenile actor. Billy quickly develops a soft spot for the inexperienced Peggy Sawyer, a newcomer to major Broadway productions. He kindly helps Peggy to calm her nerves during the tryouts, as many of their fellow chorus members remain unfriendly towards her. However, Peggy finds support from chorines Anytime Ann and Lorraine Fleming, the girlfriend of choreographer Andy Lee, and all three women eventually secure spots in the chorus.
As rehearsals progress, Marsh uncovers a troubling situation: Dorothy is playing both sides, being romantically involved with her former partner, Pat Denning, while still tied to Abner. To prevent Abner from discovering the truth and pulling his financial backing, Marsh resorts to intimidation tactics against Pat. However, Pat decides to end things with Dorothy to focus on building his own career in Philadelphia.
After weeks of rehearsals, the company heads to Philadelphia to premiere the show. Dorothy, upon seeing Pat with Peggy, feels a pang of jealousy despite their innocent friendship. At a pre-opening party, Dorothy drinks too much and has a confrontation with Abner, which leads to him threatening to withdraw his support. To remedy the situation, Marsh negotiates a truce that hinges on Dorothy's apology.
When Dorothy invites Pat over to her hotel room to discuss their relationship, she becomes unruly under the influence of alcohol. Peggy Sawyer, upon overhearing a conversation about Marsh’s plans to sideline Pat, rushes to inform him. During the commotion, Dorothy injures her ankle, jeopardizing her role as the leading lady right before the performance.
On opening day, Abner reveals a new lead, Anytime Ann, but she insists that only Peggy can truly carry the show. Surprised by Peggy's growth, Marsh decides to give her the chance and works intensively with her on her acting, singing, and dancing skills.
Just before Peggy’s debut, she receives warm encouragement from both Billy and a now-convalescing Dorothy, who has resolved to marry Pat. Marsh gives Peggy a powerful pep talk, stating: > “Sawyer, you’re going out a youngster, but you’ve got to come back a star!”
The grand spectacle features lavish musical numbers, culminating in Peggy's unforgettable performance of '42nd Street'. As the curtain falls on the play, an exhausted Julian Marsh finds a moment of respite seated on the theater’s back steps, listening to patrons mention, "Marsh will probably say he discovered her. Some guys get all the breaks."
