Moulin Rouge! is set in the Montmartre Quarter of Paris, France, during the Belle Epoque at the turn of the 20th century. The musical relates the story of Christian, a young composer, who falls in love with cabaret actress Satine, who is the star of the Moulin Rouge. Similar to the movie, the musical's score weaves together original songs with popular music, "including songs that have been written in the 17 years since the film's premiere."

Act I
The Moulin Rouge cabaret club, "where all your dreams come true," is in full swing under the direction of Harold Zidler, flanked by four dancers: Nini, Babydoll, Arabia, and La Chocolat. Christian arrives at the Moulin Rouge with fellow Bohemians, Henri de Toulouse-Lautrec and Santiago, the Argentinean. At the same time, the money-motivated Duke of Monroth is introduced as well ("Welcome to the Moulin Rouge"). Right before Zidler introduces the Moulin Rouge's Sparkling Diamond, Christian interrupts to start a story "about love," about a woman named Satine.

The musical flashes back to Christian's arrival in 1899 to the Montmartre district of Paris from England, where he meets Toulouse-Lautrec and Santiago, who are attempting to create a play with songs in it. The two are impressed by Christian's musical and songwriting talents and ask for help to get their work produced at the Moulin Rouge. The trio celebrates the Bohemian ideals of truth, beauty, freedom, and love ("Truth, Beauty, Freedom, Love").

Back at the Moulin Rouge, Zidler introduces Satine ("The Sparkling Diamond"). After Satine performs for the club, Zidler prepares for her to meet and impress the Duke of Monroth, who might invest in the Moulin Rouge and save it from financial ruin. However, Satine mistakes Christian for the Duke. Toulouse-Lautrec and Santiago distract Zidler from seeing Satine and Christian interact. While dancing and still thinking she is speaking with the Duke, Satine invites Christian to come to her dressing room in "the Elephant" outside of the club ("Shut Up and Raise Your Glass").

Arabia, Babydoll, and La Chocolat share their worries with Satine backstage about the Moulin Rouge's financial future. Nini expresses cynicism about its future, while Satine tries to maintain the group's morale. Afterward, Zidler expresses the dire straits that the club is in and stresses the importance of Satine impressing the Duke. Satine, who is concealing her worsening consumption from her colleagues, resolves to stay strong for them ("Firework").

Christian arrives in the Elephant hoping to impress Satine with his musical talent, whereas Satine is prepared to seduce him, under the impression that he is the Duke. Christian's true identity is revealed ("Your Song"). The Duke interrupts them; Christian and Satine claim they were practicing lines for a new show, Bohemian Rhapsody. With Zidler's help, Christian, Satine, Toulouse-Lautrec, and Santiago pitch the show to the Duke with an improvised plot about an evil gangster attempting to woo an ingenue who loves a poor sailor ("So Exciting! (The Pitch Song)"). The Duke decides to back the show. Zidler reminds Satine that her duty is to keep the Duke happy for the sake of the Moulin Rouge. She dismisses Christian from the Elephant. The Duke returns, and he and Satine spend the evening together ("Sympathy For The Duke").

In Montmarte, Toulouse-Lautrec shares with Christian that he fell in love with Satine many years ago, when she was living on the streets. He was impressed by her spirit but was too self-conscious to ever share his love for her over the years. He urges Christian to return to Satine and confess his love for her, insisting to him, "The greatest thing you'll ever learn is just to love and be loved in return" ("Nature Boy"). Christian goes back to Satine to convince her that they should be together. Though she initially finds this ridiculous, she eventually falls for him ("Elephant Love Medley").

Act II
Two months later, rehearsals are underway for Bohemian Rhapsody. Christian and Satine continue seeing each other behind the scenes, and Santiago falls in love with Nini ("Backstage Romance"). As the company rehearses, tensions rise between Toulouse-Lautrec and the controlling Duke. Backstage, Nini tells Satine that she needs to be careful about her relationship with Christian and keep the Duke happy, as he once threw a vial of acid in the face of another woman who betrayed him. Satine tells Christian that their relationship endangers the show and the Moulin Rouge, but he counters by writing a secret love song to affirm their love ("Come What May").

In the Champs-Élysées neighborhood, the Duke tells Satine that he wants every part of her, including her heart. Despite Satine's protests that she does not "fit in" with the upper-class society of Paris that he inhabits, he remodels her image accordingly against her wishes ("Only Girl In A Material World"). Back in rehearsals, the Duke continues to involve himself in the show's creative aspects, to the frustration of Toulouse-Lautrec. It becomes clear that Bohemian Rhapsody is a metaphor for Christian, Satine, and the Duke, resulting in an outburst by Christian. The Duke, enraged, threatens to reconsider his investment entirely. Zidler reminds Satine that she alone can fix the dilemma with the Duke. Satine's illness worsens, but she urges her colleagues not to share that she is ill; she wants to fight to keep the Moulin Rouge alive and for the play to go on.

Toulouse-Lautrec and Santiago tell Christian he needs to forget about Satine and move on with his life. Christian retreats in frustration and drinks absinthe with them in excess, at one point, imagining Satine as The Green Fairy ("Chandelier"). Christian expresses jealousy and disgust that Satine is with the Duke instead of him, ignoring Zidler's warning that falling in love with a prostitute "always ends badly" ("El Tango de Roxanne"). At his castle, the Duke threatens Satine from being with Christian ever again, saying that he will have Christian killed if she chooses him. Christian interrupts their conversation to try to save Satine, singing their secret song. Knowing that Christian would be killed if she says otherwise, Satine tells Christian that she does not love him. Christian leaves.

Christian decides that without Satine's love, he will load a prop gun with real bullets and commit suicide on stage during the opening night of the play. Meanwhile, Satine's illness dramatically worsens. Together, she and Toulouse-Lautrec stand up to the Duke, who leaves the Moulin Rouge before the performance begins ("Crazy Rolling"). As Satine performs her part, Christian enters and asks her to face him as he turns the gun his way. Before he pulls the trigger, Satine sings their secret song, all at once saving his life and revealing to him that she loved him the entire time. After a final song together in which the two affirm their love one last time, Satine tells Christian to "tell our story," and subsequently dies in his arms ("Your Song (Reprise)"). Over a year later, Bohemian Rhapsody turns out to be a success, and Zidler regains control of the Moulin Rouge. Christian affirms that his and Satine's story will forever be told ("Come What May (Reprise)").