The play, set in the 1880’s, opens at the home of Horace Vandergelder (from the German das geld, “money”), located above his successful hay, feed and provision store in Yonkers, New York. A widower, and immensely proud of being a half-millionaire, Horace is preparing for a trip to New York City. Having rejected the suit of an artist, Ambrose Kemper, who wants to marry his niece, Ermengarde, Horace has decided to send his niece away to frustrate any wedding plans. After Vandergelder leaves, Dolly Levi, a friend of his late wife, and utilized by Horace as a marriage-broker, enters. Dolly is sympathetic to the niece’s romance, and agrees to help Ermengarde and Ambrose. When Vandergelder returns, he tells Mrs. Levi that he now plans to marry the New York milliner Irene Molloy. In a scene incorporated almost word-for-word from Moliere’s The Miser (L’Avare), Dolly convinces him that she has found him a perfect wife (purely imaginary), with the result that he agrees to delay his marriage proposal to Mrs. Molloy. Cornelius Hackl, the chief store clerk, and Barnaby Tucker, another clerk, decide to take advantage of Vandergelder’s absence by themselves going for an adventure in New York.
Act Two begins with Irene Molloy explaining to her assistant, Minnie Fay, that she will accept Horace’s proposal, although she does not love him, so that she can leave the hat business. Walking in the neighborhood, Cornelius and Barnaby suddenly see Horace and Dolly, and dash into the hat shop to hide. In a farcical scene, Horace discovers the presence of the hidden men, and, scandalized, tells Irene that he is ending their relationship. Cornelius falls in love with Irene. Since Dolly has said that the clerk is really a wealthy socialite, Irene insists that Cornelius and Barnaby take her and Minnie to dinner at the Harmonia Gardens Restaurant.
In the Third Act, Horace arrives at the same restaurant, followed by Dolly with Horace’s niece, Ermengarde, and her boyfriend, Ambrose. Having noticed them, Horace arranges for a cab driver to intercept the young couple when they leave the restaurant and take them to the home of Flora, his relative. Irene, Minnie, Barnaby and Cornelius then enter, and are seated at a table next to Horace and Dolly, separated only by a screen. Irene orders expensive food and champagne, causing Cornelius to fret about paying the bill. Horace has accidentally dropped his wallet, which his servant finds and mistakenly gives to Cornelius. Although the clerk eventually tells Irene that he is not rich, Irene is supportive and tells him that they should just have a good time. Dolly tells Horace that his prospective bride has eloped with someone else. In a scene emphasizing eating and enjoyment, Dolly tells Horace that she herself would never marry Horace, thus planting the idea in his head. Cornelius and Barnaby, having discovered Horace’s presence, try to escape by disguising themselves with women’s coats and veils. Horace, however, recognizes and fires them. Ermengarde enters and faints, and is carried out by Ambrose. Dolly summarizes Horace’s losses, and broaches more directly the subject of marriage.
In the final act, all the characters arrive at the home of Flora van Huysen, Horace’s relative. Flora misidentifies the romantic couples, believing, for example, that Barnaby (dressed as a woman) is Horace’s niece, and that the real Ermengarde and Ambrose are somebody else, so that the farcical situation becomes even more chaotic. Eventually, true identities are revealed, and Flora persuades Horace to let his niece marry Ambrose. In a grand soliloquy, Dolly addresses her departed husband on her wish to rejoin the human race and to marry Horace in order to spread his money around, creating happiness. Horace enters and proposes marriage to Dolly. Cornelius also decides to marry Irene. The play concludes with Barnaby speaking to the audience about the importance of having enough adventure in one’s life.