The voices of telephone operators ring out in the dark: "Grand Hotel Berlin, at your service." The telephone operators promise prompt service for The Grand Hotel's illustrious clients. As the sound grows to a loud din, The Doctor, in a room of his own, injects some morphine into his arm to ease the pain caused by wounds that he suffered in the Great War. He smiles, knowing that today will be another exciting day, where people come and people go, and people's lives change in The Grand Hotel. One by one, people enter the lobby of the hotel during ("The Grand Parade").

Baron Felix Von Gaigern enters the lobby of the hotel while being vigorously hounded by a gangster who thinly veils himself as a chauffeur. The Baron avoids paying The Chauffeur the money he owes by claiming to be very busy "breathing". Meanwhile, Erik, the front desk operator, waits on news of his son's birth while still attempting to attend to his duties as front desk operator. One of those duties includes dealing with the dancing diva who is Elizaveta Grushinskaya, entering the lobby with a flourish alongside her company manager, Witt; a theatre impresario, Sandor; and Grushinskaya's dresser, Raffaela. Grushinskaya has just come from a disappointing performance, during which she stumbled. She swears, "I cannot dance any more! Grushinskaya retires!" Her bevy of assistants follow her off to her room to convince her otherwise while Rafaela runs to the phones at the side of the lobby.

Rafaela tries to sell some of Grushinskaya's jewelry to pay for the shows that Grushinskaya wants to cancel. Next to her is a woman, Frieda Flamm, who has taken the stage name Flaemmchen. She is an aspiring actress who is afraid that she might be pregnant. Next to her is Preysing, a general manager of a textile mill, who is waiting nervously to hear from Boston to see if his company is going to merge with another, or if his company is going to go bankrupt. The final man at the phones is Otto Kringelein, who is mortally ill and has decided to spend his last days extravagantly at The Grand Hotel.

Erik discovers that his wife is in great pain while giving childbirth. The Doctor dismisses her pain as insignificant to that which he suffers everyday. He tells a bellhop that he may be checking out today, but the bellhop dismisses the claim, "Sir, you said that yesterday." Kringelein tries desperately to check into the overbooked Grand Hotel, but the general manager, Rohna, can not find a room for him. Kringelein works himself into a fury and passes out. The Baron comes to his aid and uses his pull to make sure that Kringelein can spend his final days in style. Kringelein is overjoyed and sings of the pleasures he'll find ("At the Grand Hotel").

At the coffee bar, two African-American entertainers, The Jimmys, sing to the crowd ("Maybe My Baby"). Flaemmchen waits nervously for Preysing, as she has agreed to be his typist for the evening. The Jimmys tell Flaemmchen all about America, and she wonders if perhaps America is the place where she can find fame and fortune.

Witt and Sandor successfully convince Grushinskaya that she must dance by quoting old reviews of her dancing that glowingly referred to her as ("Fire and Ice"). While Grushinskaya finds the strength in past glory to continue to practice, Raffaela sings of her passion for Grushinskaya and how she wishes that they could just retire to a ("Villa on a Hill").

The Baron and Flaemmchen cross paths near the coat room and flirt playfully. She enjoys The Baron's interest in her, and it gives her the confidence to wonder if she could be a movie star in Hollywood, being the ("Girl in the Mirror").

Preysing's attorney, Zinnowitz, hounds him to calm his shareholders by telling them that the merger is on with the Boston company. Preysing stands by his morals, saying that he can't tell his shareholders things that aren't true. Zinnowitz tries unsuccessfully to get Preysing to change his mind by claiming that ("Everybody's Doing It"). Preysing meets with Flaemmchen, and they head off to his room so that she can type his notes for the meeting. Just then, Preysing receives the devastating news that the Boston merger is off. Realizing that his company – and, therefore, his life – is in ruins, Preysing considers lying to his shareholders and walking down ("The Crooked Path").

The Chauffeur catches up with The Baron again and offers him a solution to his debt problems. The Chauffeur describes a necklace in Grushinskaya's room that The Baron could steal. The Baron claims that he would only ever steal as a last resort. The Chauffeur jams a gun into The Baron's ribs to remind him that his last resort is approaching very quickly.

The Baron heads off to The Yellow Pavilion to forget about his worries. There, he runs into Flaemmchen, whom he courts. She is ecstatic that a Baron would take such an interest in her. She sings to The Baron ("Who Couldn't Dance with You"). The Baron sees Kringelein, standing alone at the side of the dance hall, and asks Flaemmchen if she would dance with him. She obliges, and life returns to the fading Kringelein. Preysing interrupts and demands that Flaemmchen help him type up his notes for the shareholders' meeting. Kringelein, who used to work for Preysing, tries to hold onto his dream dance with Flaemmchen and is infuriated that Preysing would want to end the dance... and also that Preysing doesn't even seem to remember who Kringelein is.

Preysing heads off to the shareholders' meeting, and the shareholders excitedly sing ("Music Is On"). The pressure becomes too much for Preysing and he erroneously exclaims, "The Boston merger is definitely – On!"

The Baron approaches Kringelein in the lobby and tries to convince him to buy stock, because "It's crazy not to own stocks today." As The Baron ushers Kringelein off to a broker's room, The Chauffeur corners The Baron again and reminds him to steal Grushinskaya's necklace.

Meanwhile, Grushinskaya dances in her concert, but the audience is hardly appreciative of her. Grushinskaya refuses to go back out onstage and, instead, rushes back to the hotel for solace. However, upon entering her room, Grushinskaya finds The Baron standing beside her precious necklace. The Baron quickly improvises that he is in her hotel room because he is her biggest fan and has been following her all across Europe. The two jaded romantics quickly fall for each other while trying to convince themselves that ("Love Can't Happen"). They are overwhelmed by their emotions while Raffaela sits alone in her room, singing of her love for Grushinskaya in ("What You Need").

Elsewhere in the hotel, Erik tries to sneak off the job to see his wife, but Rohna stops him and threatens to fire Erik if he doesn't get back to work. Preysing, facing certain destruction once his lie is found out, decides to go to Boston and force the other company to merge with his. Preysing also manages to convince Flaemmchen to come along with him "to take care of him."

The next morning, The Baron awakes next to Grushinskaya and finds that he is as much in love with her as he was the night before. He confesses to her that he was in her room to steal her necklace, but now he wants only to be with her. Grushinskaya offers The Baron money to travel with her to Vienna, but The Baron responds, "I am not a gigolo!" He leaves to find the money on his own, and Grushinskaya basks in her newfound love, singing ("Bonjour Amour").

While The Jimmys sing ("The Grand Charleston") at the hotel bar, The Baron sees Flaemmchen and tells her of his new love for Grushinskaya, thus ending their serial flirting. Kringelein bursts into the lobby and informs The Baron that his advice on the stocks was correct! "I made more last night than I ever made in an entire year!" Kringelein buys drinks for The Baron and himself, and they sing along with The Jimmys ("We'll Take a Glass Together"). Kringelein gets so worked up that he passes out and drops his wallet. The Baron sees the wallet, bursting with money, and picks it up before helping Kringelein off to his room.

The Doctor, who has been observing all of the goings-on at The Grand Hotel, sits in his room, alone. He injects himself with more morphine and laments ("I Waltz Alone"). During his singing, Preysing corners Flaemmchen in his room and makes her undress for him. Down the hall in Kringelein's room, The Baron helps Kringelein to his bed. Kringelein realizes that his wallet is missing, and The Baron is struck by his own conscience and returns the wallet to Kringelein. Kringelein, realizing what has transpired, gives his friend a wad of money as a thank you for all of his help. The Baron is ecstatic and runs off, as he now has enough money to go to Vienna with Grushinskaya. As soon as he runs into the hall, however, he is confronted by The Chauffeur. The Chauffeur takes the wad of money and tells The Baron to go to room 420 – "A certain randy businessman will be next door, playing with his little blonde secretary. I saw his wallet, stuffed with fifty-mark notes." The Chauffeur hands The Baron a gun to make sure he gets the job done.

Back in Preysing's room, Preysing is pushing Flaemmchen further and further until she finally changes her mind and wants to leave. Preysing tries to force her to stay. The Baron sneaks in next door and is about to rob Preysing when he hears Flaemmchen's cries from the next room. He runs next door and confronts Preysing, who, in turn, accuses The Baron of being there to rob him. The fight escalates until The Baron takes out his gun, which Preysing grabs and shoots The Baron dead.

The Ghost of The Baron moves to the railway station, where he was to meet Grushinskaya before going to Vienna. He sings what were his final thoughts ("Roses at the Station").

News of The Baron's death spreads through the hotel, and all of Grushinskaya's friends agree not to tell her the news until they are in Vienna. Raffaela is tortured, wondering ("How Can I Tell Her").

The police take away Preysing to prison for killing The Baron. Kringelein asks Flaemmchen what she was doing with someone like Preysing. She tells him that, regretfully, she was with him for the money, so that she could start a new life for herself in America. Kringelein reminds her that he has money and that he will always take care of her.

Erik finds out that everything is okay with his son and wife. Witt, Sandor and Raffaela usher Grushinskaya out the lobby of the hotel, hoping that she will not hear of The Baron's death. The Doctor looks through the lobby of the hotel and notes, "Grand Hotel Berlin. Always the same – people come, people go – one life ends while another begins – one heart breaks while another beats faster – one man goes to jail while another goes to Paris – always the same." And, while the Company sings ("Grand Waltz"), The Doctor adds, "I'll stay – one more day."