In 1959, Rydell High School’s students are starting a new year. (“Grease”). Sandy Dumbrowski, the new girl at school and Danny Zuko, the leader of the ‘Burger Palace Boys’, had a brief romantic fling over the summer. Sandy recounts her version of the fling to the ‘Pink Ladies’ (Jan, Marty, Frenchy, and Betty Rizzo), while Danny tells the Boys (Roger, Doody, Sonny, and Kenickie) his rendition (“Summer Nights”). Sandy and Danny soon bump into each other at school, and while Sandy is happy to see him, he plays it cool.
Meanwhile, the kids gather as Doody shows off his new guitar. The rock star wannabe gives an impromptu concert in the hall (“Those Magic Changes”). At Marty’s pajama party, the girls give each other pierced ears, and talk about boys. Marty tells about her long-distance courtship with Freddy (“Freddy, My Love”). Meanwhile, the Burger Palace Boys are busy stealing hubcaps and teasing Kenickie about his new (used) car (“Greased Lightning”). Danny sees Sandy again and tries to apologize for his behavior. Head cheerleader Patty Simcox interrupts to prompt Sandy to join the squad and to tease Danny about his latest indiscretions (“Rydell Fight Song”). Rizzo teases Danny for falling for a girl who resembles the excessively proper teenage ingénue, Sandra Dee (“Look at Me, I’m Sandra Dee”). Sandy realizes that Danny is putting her off to be cool and wishes she had never met him. Then Danny suggests that Marty go out with Eugene, and she chases after him. The scene ends with a spirited pledge of friendship (“We Go Together”).
At the High School Hop, everyone is dancing, except Sandy (“Shakin’ At the High School Hop”). She is home feeling sorry for herself (“It’s Raining on Prom Night”). Meanwhile, favorite radio DJ Vince Fontaine, is warming the kids up for the hand-jive dance contest. Kenickie dumps his blind date, Cha-Cha DiGregorio, and pairs up with Rizzo. Danny and Cha-Cha then proceed to win the dance contest (“Born to Hand Jive”). A few days later at the Burger Palace after school, a couple of the guys run into Frenchy, who flunked out of Rydell and has now dropped out of beauty school (“Beauty School Dropout”). Danny, who has taken up track in order to win back Sandy’s affections, does not know that Cha-Cha’s boyfriend’s gang has challenged the guys to a rumble. He is more concerned about patching things up with Sandy at the Twi-Light Drive-In, but he moves too fast for her, and she leaves (“Sandy”).
A couple of days later, the “greasers” are having a party in Jan’s basement, as Doody and Roger sing “Rock ‘n’ Roll Party Queen.” Sandy wonders what she needs to do to fit in at Rydell (“Look at Me, I’m Sandra Dee Reprise”). The next time Sandy meets up with the Burger Palace Boys and the Pink Ladies, she has transformed herself into a greaser’s dream date (“You're The One That I Want”). Rizzo and Kenickie reunite. All ends happily (“We Go Together-Reprise”).