Gypsy, “a musical fable” suggested by the memoirs of Gypsy Rose Lee, opens at a Seattle vaudeville house where “Baby June” and “Baby Louise” audition for a kiddy show singing and dancing Let Me Entertain You. Their mother, Rose Hovick, enters, calling “Sing out, Louise!”, immediately establishing herself as the quintessential stage mother. In the next scene Rose sings Some People, and explains her determination to develop June’s vaudeville career. Skeptical of Rose’s motives, her aging father refuses to subsidize the scheme, whereupon Rose rips her father’s solid gold plaque off the wall and hitchhikes to Los Angeles with the girls. There she meets Herbie, whom she entices to represent the girls’ act. At the same time, she dangles the possibility of romance and marriage in their duet, Small World.
Through Herbie’s efforts, Baby June and Her Newsboys becomes a top vaudeville act but, as the years pass, June and Louise mature, vaudeville wanes, and the troupe is found in “two plaster-cracked hotel rooms in Akron.” Rose begins Louise’s birthday celebration with a breakfast of reheated Chinese food. Herbie arrives with “Mr. Goldstone of the Orpheum Circuit,” who offers a contract to save the day. A “forgotten Louise” sits with her present, a baby lamb, and sings Little Lamb (“I wonder how old I am.”)
The next scene takes place in a Chinese restaurant in New York, where Rose and Herbie discuss the next day’s audition at Grantzinger’s Palace. Herbie begs rose to marry him and threatens, that if she does not, he may some day “walk.” Rose sings You’ll Never Get Away From Me and they end up dancing. Mr. Grantzinger does offer June a contract, but on the condition that “she go to school for a solid year and take acting lessons” and that Rose “stay away.” rose, hearing this, storms out of his office. The girls, who dream of a normal life, sing If Momma Was Married, but to no avail. The troupe, infrequently employed and restless, continues to tour.
In a theater alley in Buffalo, Tulsa, one of the “Farmboys” in the act, tells Louise his dream of forming a dance team and performs the number All I Need Is the Girl. Louise dreams of being that girl, but is again disappointed. In the final scene of Act One, Louise brings Rose a goodbye note from June, who has herself run off with Tulsa. Rose is stunned. Herbie begs her to marry him and give up show business, and Louise urges her to accept Herbie’s offer. Instead, Rose announces to a horrified Louise that she will make her a star, and then sings Everything’s Coming Up Roses to conclude the act.