After the Overture, the citizens of Oz enter to celebrate the death of the Wicked Witch of the West ("No One Mourns the Wicked"). Glinda descends in her bubble onto the stage to confirm the circumstances of the Witch's melting by Dorothy. The scene shifts to the birth, years earlier, of the green-skinned Elphaba Thropp, daughter of the governor of Munchkinland. Elphaba suffers an unhappy childhood, facing discrimination because of her skin color and only being raised by her widowed father. At Shiz University, Elphaba first encounters Galinda, a spoilt and popular Uplander ("Dear Old Shiz"). Madame Morrible has decided that since Elphaba's younger sister, Nessarose is in a wheelchair, it would be best for her to share Madame Morrible's accommodations. No arrangements have been made for Elphaba, and Galinda accidentally offers to share her private suite. Elphaba is angry. She has always looked after her sister. When Madame Morrible tries to wheel Nessarose away, Elphaba lashes out and uses her uncontrollable powers to bring her sister back to her. This impresses Madame Morrible, the headmistress of Shiz, who notes that Elphaba's talents may be of use to the Wizard of Oz ("The Wizard and I"); she promises to give Elphaba private sorcery classes. Galinda is jealous and takes an immediate dislike to Elphaba; Elphaba takes a similar dislike to Galinda ("What Is This Feeling?").
Doctor Dillamond, a Goat and Shiz University's only Animal professor, is teaching history class when it is interrupted by an anti-Animal slogan on the back of his blackboard. After dismissing the class, he confides in Elphaba that something is causing the Animals of Oz to lose their powers of speech ("Something Bad"). Fiyero, a Winkie prince, arrives at Shiz and immediately impresses his own brand of cavalier, carefree living on the students ("Dancing Through Life").
Fiyero organizes a party at a local ballroom. While preparing for the dance, Galinda's friends discover a black pointed hat in a box. Galinda gives it to Elphaba as a 'present,' knowing the hat is "hideodious." Galinda convinces a munchkin student named Boq to take Nessarose (Elphaba's wheelchair-bound sister) to the party, more to avoid unwanted attention from Boq than out of any desire to be kind. Nessa has a crush on Boq and is so overjoyed to be invited that she asks Elphaba if there is any way to repay what she perceives as Galinda's kindness. At the dance, Galinda is surprised by the appearance of Madame Morrible, who gives her a training wand and tells her that Elphaba has insisted she be included in the sorcery seminar. Clearly, despite apparent misgivings, Elphaba has done as her sister requested and found something nice to do for Galinda. Elphaba arrives wearing the hat Galinda had given her, only to be ridiculed and laughed at. Defiant, she proceeds to dance alone and without musical accompaniment. Feeling guilty, Galinda joins Elphaba on the dance floor, marking the start of a new friendship between the two. After the dance, Galinda and Elphaba talk in their room. Elphaba confides that her father hates her because of her green skin and that he had forced her mother to eat milk flowers to ensure that Nessarose was not born the same. The milk flowers caused Nessarose to be born early, crippling her and killing their mother. Moved by a desire to help her new friend, Galinda decides to give Elphaba a makeover and to make her popular ("Popular").
The next day, Ozian officials take Doctor Dillamond away. The new history teacher arrives with a frightened lion cub in a cage, revealing that Animals that are kept in cages will never learn to speak. Outraged, Elphaba casts a freezing spell over the whole class except for Fiyero, and together they steal the cub and set it free. There is a hint of chemistry between the two, but Fiyero leaves, embarrassed. It begins raining, and Elphaba takes refuge under a bridge and regrets that it would be impossible for someone like Fiyero to love someone like her ("I'm Not That Girl"). Madame Morrible finds Elphaba and announces that she has been granted an audience with the Wizard. At the train station, Galinda and Fiyero see Elphaba off to the Emerald City. Galinda complains to Elphaba privately that Fiyero's affections toward her seem to be waning. In an attempt to impress Fiyero, Galinda announces that she will change her name to "Glinda" in honor of Doctor Dillamond's persistent mispronunciation. Fiyero does not appear to notice and, feeling bad for Glinda, Elphaba invites her along to see the Wizard.
After a day of sightseeing in the Emerald City ("One Short Day"), Elphaba and Glinda meet the Wizard. Eschewing the special effects that he employs for the benefit of most visitors, he invites Elphaba to join him ("A Sentimental Man"). As a test, he asks that Elphaba give his Monkey servant, Chistery, the ability to fly using the Grimmerie, an ancient book of spells. Elphaba demonstrates an innate understanding of the lost language and successfully gives Chistery wings. The Wizard reveals an entire cage full of monkeys who now also have wings because of Elphaba's spell, and remarks that they will make good spies to report any subversive Animal activity. Realizing that she has been used and that the Wizard has no power of his own, Elphaba runs away with the Grimmerie, pursued by the palace guards.
Elphaba and Glinda run into the tallest tower, where they hear Madame Morrible, revealed to them lately as the Wizard's press secretary, declaring to all of Oz that Elphaba is a "Wicked Witch" and is not to be trusted. Falling to the floor, Elphaba enchants a broomstick to fly and tries to convince Glinda to join her in her cause, but Glinda cannot resist the call of popularity and refuses. Leaving Glinda behind, Elphaba rises into the sky on the broomstick, promising to fight the Wizard with all of her power. ("Defying Gravity").
Some time has passed, and Elphaba's exploits have earned her the title "The Wicked Witch of the West" ("No One Mourns the Wicked (Reprise)"). Glinda and Madame Morrible hold a press conference to announce Glinda's surprise engagement to Fiyero ("Thank Goodness").
Meanwhile, Elphaba arrives at the governor's residence in Munchkinland seeking refuge, reluctantly trying to ask her father for help. But Nessa, now the governor of Munchkinland, harshly reveals that he died of shame due to Elphaba's actions at the Emerald City. Nessa refuses to help hide a fugitive, citing her status as an unelected official, and criticizes Elphaba for not using magic to help Nessa overcome her disability. To assuage her feelings of guilt, Elphaba enchants Nessa's jeweled shoes, turning them from silver to ruby red and enabling her to walk. Boq, who is now Nessa's servant, is summoned and reveals that a ball is being held for Glinda and Fiyero's engagement and he must go tell that his heart lies with Glinda. Furious, Nessa casts a mispronounced spell from the Grimmerie, causing Boq's heart to shrink. While Elphaba attempts to save him, Nessa reflects on how her obsession with Boq has led her to oppress the Munchkin people ("The Wicked Witch of the East"). Elphaba saves Boq by turning him into the Tin Woodman – horrified, Nessa lays the blame on Elphaba.
Elphaba returns to the Wizard's palace to free the rest of the winged monkeys. The Wizard attempts to regain her favor by agreeing to set them free ("Wonderful"). Upon discovering a now-speechless Doctor Dillamond among the monkeys, Elphaba rejects his offer and attempts to escape, running into Fiyero in the process. Confirming his true love for Elphaba, he runs off with her. Glinda sees this and is crestfallen that she has been betrayed by those closest to her ("I'm Not That Girl (Reprise)"). In an attempt to finally capture Elphaba, Madame Morrible decides to create a cyclone that will endanger Nessa.
In a dark forest, Fiyero and Elphaba express their mutual and passionate love ("As Long as You're Mine") but are interrupted when Elphaba senses that her sister is in danger. She flies off to help but is too late, arriving just after Dorothy's house has landed on Nessa, killing her. Elphaba becomes frustrated and confronts Glinda for giving Nessa's shoes to Dorothy, and a fight ensues. The palace guards arrive and ambush Elphaba, but Fiyero intervenes and tells them to "Let the green girl go!" allowing Elphaba to escape before surrendering himself. The guards take him to a nearby cornfield to be tortured until he tells them where Elphaba has fled. At one of Fiyero's castles, Elphaba tries to cast a spell to save Fiyero's life but, thinking she has failed, she begins to accept her notorious reputation as "wicked" ("No Good Deed").
Meanwhile, Boq and the citizens of Oz prepare a witch-hunt ("March of the Witch Hunters"); Boq claims that Elphaba turned him into the Tin Woodman as an act of evil, while the lion cub that Elphaba and Fiyero freed at Shiz is also at the gathering and turns out to be the "Cowardly" Lion. Seeing the witch-hunt, Glinda realizes that Madame Morrible was behind Nessa's death. But the mad press secretary reminds her that she wanted this in the first place and tells her to "smile and wave and shut up!". Glinda travels to Elphaba and Fiyero's castle to persuade her to let Dorothy go, but she refuses. Elphaba makes Glinda promise not to clear her name and to take charge in Oz. She agrees, and the two confirm a true friendship ("For Good"). As the mob arrives at the castle, Dorothy throws a bucket of water on Elphaba, apparently melting her, while Glinda leaves with the Grimmerie.
In recapitulation, it is revealed that the Wizard is actually Elphaba's father. Glinda orders the Wizard to leave Oz in his balloon, and sends Morrible to prison, before preparing to address the citizens of Oz, returning to the opening scene of the show. Meanwhile, Fiyero, whom Elphaba had turned into the Scarecrow, opens a trap door in the castle; Elphaba, very much alive, emerges, and the two are reunited. Fiyero tells Elphaba that if the two of them want to be safe, no one must ever know that she is alive. Glinda addresses the citizens of Oz, proclaiming that she would like to be "Glinda the Good" as she will reform the government. Elphaba and Fiyero leave Oz, as Glinda celebrates with the citizens of Oz ("Finale").