Act One

At the dawn of the 1930s in Berlin, the Nazi party quietly grows stronger. The Kit Kat Klub is a seedy cabaret, a place of decadent celebration set against the backdrop of growing Nazi terror. The Klub's Master of Ceremonies, or Emcee, together with the cabaret girls and waiters, warm up the audience ("Willkommen").

In a train station, Clifford Bradshaw, a young American writer coming to Berlin in the hopes of finding inspiration for his new novel, arrives. He meets Ernst Ludwig, a German who offers Cliff work and also recommends a boardinghouse. At the boardinghouse, Fräulein Schneider offers Cliff a room for one hundred marks; he can only pay fifty. After a brief debate, she relents and lets Cliff live there for fifty marks. Fräulein Schneider observes that she has learned to take whatever life offers ("So What?").

As Cliff visits the Kit Kat Klub, the Emcee introduces a British singer, Sally Bowles, who performs a racy, flirtatious number ("Don't Tell Mama"). Afterward, she asks Cliff to recite poetry for her; he recites "Casey at the Bat". Cliff offers to take Sally home, but she says that her boyfriend Max, the club's owner, is too jealous. Sally then performs her final number at the Kit Kat Club aided by the female ensemble ("Mein Herr"). The cabaret ensemble then performs a song and dance, calling each other on inter-table phones and inviting each other for dances and drinks ("The Telephone Song").

The next day, Cliff has just finished giving Ernst an English lesson when Sally arrives. Max has fired her and thrown her out, and now she has no place to live, and so she asks him if she can live in his room. At first he resists, but she convinces him (and Fräulein Schneider) to take her in ("Perfectly Marvelous"). The Emcee and two female companions sing a song ("Two Ladies") that comments on Cliff and Sally's unusual living conditions. Herr Schultz, an elderly Jewish fruit-shop owner who lives in her boardinghouse, has given Fräulein Schneider a pineapple as a gift ("It Couldn't Please Me More"). However, in the Kit Kat Klub, a young waiter begins singing a patriotic anthem to the Fatherland ("Tomorrow Belongs to Me") a cappella, with others joining him, including the Emcee.

Months later, Cliff and Sally are still living together and have fallen in love. Cliff knows that he is in a "dream," but he enjoys living with Sally too much to come to his senses ("Why Should I Wake Up?"). Sally reveals that she is pregnant, but she does not know the father and reluctantly decides to get an abortion. Cliff reminds her that it could be his child, and seems to convince her to have the baby. Ernst then enters and offers Cliff a job—picking up a suitcase in Paris and delivering it to his "client" in Berlin—easy money. The Emcee comments on this with "Sitting Pretty", or, in later versions, "Money".

Meanwhile, Fräulein Schneider has caught one of her boarders, Fräulein Kost, bringing sailors into her room. Fräulein Schneider forbids her from doing it again, but Fräulein Kost threatens to leave. She also mentions that she has seen Fräulein Schneider with Herr Schultz in her room. Herr Schultz saves Fräulein Schneider's reputation by telling Fräulein Kost that he and Fräulein Schneider are to be married in three weeks. After Kost leaves, Fräulein Schneider thanks Herr Schultz for lying to Kost. Schultz, however, says that he was serious, and proposes to Fräulein Schneider ("Married").

At Fräulein Schneider and Herr Schultz's engagement party, Cliff arrives and delivers the suitcase to Ernst.  Afterward, looking for revenge on Fräulein Schneider, Fräulein Kost tells Ernst, who now sports a Nazi armband, that Schultz is a Jew. Ernst warns Fräulein Schneider that marrying a Jew may not be wise. Fräulein Kost and company reprise "Tomorrow Belongs to Me", this time with even more overtly disturbing Nazi overtones, as Cliff, Sally, Fräulein Schneider, Herr Schultz and the Emcee look on.