In the 1920s, Lorelei Lee, a blonde from Little Rock, Arkansas, and her friend Dorothy Shaw board the ocean liner Ile de France, to embark for France ("It's High Time"). Lorelei and her boyfriend (who is her "sugar daddy"), Gus Esmond, are parting for a while ("Bye, Bye Baby"); Gus is going to Little Rock, and Dorothy is Lorelei's chaperone. On the ship, Lorelei has many admirers, including the rich Philadelphian Henry Spofford III, and an Englishman, Sir Francis (Piggy) Beekman. Lorelei is worried that Gus will find out about an old secret of hers and break off their engagement ("I’m Just A Little Girl From Little Rock"), and she is afraid to open a wire that she receives from him. Meanwhile, Dorothy flirts with a group of olympic sportsmen ("I Love What I’m Doing (When I’m Doing It For Love)"). Lorelei disapproves of this as the olympians are poor; she is sure that Gus has broke up with her and tells Dorothy that they need to find some rich men. Lorelei chooses the zipper king, Josephus Gage. For Dorothy she chooses Henry Spofford. Lady Beekman is trying to sell her tiara to an American. Lorelei wishes to buy it, but does not have the money, so she decides to persuade Sir Francis to lend her the money ("Its Delightful Down In Chile").
On arrival in Paris, Dorothy and Henry are becoming attracted to each other ("Sunshine"). Two French detectives, Robert and Louie Lemanteur, are looking for Lorelei, trying to recover Lady Beekman’s tiara. They don't speak much English, but they fall for the charms of the girls and offer to take them out. Josephus Gage arrives with Lorelei, wearing the first French dress to use a zipper. It is suggested that everyone have cocktails, to Mrs Spofford’s delight, but Josephus does not drink, instead eating raw carrots ("I’m a Tingle I’m Aglow"). Henry, left alone with Dorothy, proposes marriage ("You Say You Care"), but she says that she is not good enough for him.
Gus arrives suddenly and discovers that Lorelei is dating Josephus. His father has always disapproved of Lorelei. Gus retaliates by dating Gloria Stark, a dancer, promising to make her a star.
Everyone is at a Paris club. Lady Beekman and the two detectives are still trying to recover her tiara. Sir Francis is there with two ladies. Lorelei and Dorothy are there with Josephus and Henry. Gus arrives and nearly comes to blows with Josephus. The floor show includes performances by Gloria ("Mamie Is Mime") and Coquette. Lorelei sings too ("Diamonds are a Girls Best Friend"). Gus tells Lorelei that he loves her so much that he would leave his father's business for her sake. She admits that she shot a man in Little Rock, but it was in self-defense (the man was attempting to rape her), so she was acquitted; they make up.
The Americans miss the United States ("Homesick Blues") and go home. Lorelei delays marrying Gus until his father accepts her. Mrs. Spofford gives Dorothy some advice ("Keeping Cool with Coolidge"). Gus's father, Mr. Esmond, arrives and finds that Lorelei is wearing a dress covered in his buttons and that she knows everything about his business ("Button Up with Esmond"). He is impressed and approves of the marriage.