A present day theatrical troupe is presenting Shakespear's The Taming of the Shrew in Baltimore, Maryland. The cast includes Fred Graham and his former wife, Lilli; also Bill Calhoun, an irresponsible gambler, and the girl whom he is interested in, Lois Lane. Bill breaks down and confesses to Lois that he is involved with gangsters, who have his I.O.U. for $10,000 from a crap game. This is not the first time Lois has had to tolerate Bill's escapades, and she inquires poignantly why he cannot behave himself ("Why Can't You Behave?"). Meanwhile Fred and his ex-wife--though divorced--begin to realize that their one-time tender feelings for each other have not completely died out. They start to reminisce about the shows in which they had appeared--including an old-fashioned Viennese operetta ("Wunderbar"). Just before the opening night of The Taming of the Shrew, Fred sends his star, Lola, flowers. By mistake they come to Lilli's dressing room--further proof to her that Fred still loves her. She now openly reveals that that love is reciprocated ("So In Love").

On stage, the performance of The Taming of the Shrew is taking place ("We Open in Venice"). As a play within a play, we learn that Bianca cannot get married until her older sister, Katherine, has found a husband ("Tom, Dick and Harry"). When Petruchio arrives in Padua to seek out a rich wife ("I've Come to Wive it Wealthily in Padua") he is chosen for Katherine. The latter, a shrew, makes no attempt to conceal her feelings about men ("I Hate Men"), while Petruchio knows that Katherine is not the woman of his dreams ("Were Thine That Special Face"). Nevertheless, he agrees to marry her.

We are now transferred from Shakespeare's Padua back to the intrigues within the theatrical company. Having learned that Fred's flowers were meant for Lola, Lilli bursts into a fit of temper, and announces hotly that she is leaving the company for good. Her departure, however, is delayed by the arrival of gangsters coming to collect from Bill the $10,000 for his I.O.U.

In the second act we return to The Taming of the Shrew. Petruchio and Katherine are now man and wife. Since her violent tempers and caprices are complicating Petruchio's life to no end, he begins to recall nostalgically his single-blessedness ("Where Is the Life that Late I Led?"). Backstage, when Bill reprimands Lois for flirting with one of the actors, she makes light of her tendency to be fickle ("Always True to You In My Fashion"). But, for all his troubles with Lois, Bill has good cause for cheer. There has been a violent shake-up in the gangster world, as a result of which Bill's I.O.U. is no longer valid. Bill and Lois are now reconciled, and Katherine and Fred return to each other.