Don Lockwood is a popular silent film star with humble roots as a singer, dancer and stuntman. Don barely tolerates his vapid, shallow leading lady, Lina Lamont, though their studio, Monumental Pictures, links them romantically to increase their popularity. Lina herself is convinced they are in love, despite Don's protestations otherwise.
At the premiere of his newest film, The Royal Rascal, Don tells the gathered crowd an exaggerated version of his life story, including his motto, which is "Dignity. Always dignity". His words are humorously contradicted by flashbacks showing him taking on a wide range of menial and humiliating roles on stage and in film alongside his best friend Cosmo Brown.
To escape from his fans after the premiere, Don jumps into a passing car driven by Kathy Selden. She drops him off, but not before claiming to be a stage actress and sneering at his "undignified" accomplishments. Later, at a party, the head of Don's studio, R.F. Simpson, shows a short demonstration of a Vitaphone talking picture but his guests are unimpressed.
To Don's amusement and Kathy's embarrassment, she pops out of a mock cake right in front of him as part of the entertainment; Kathy, it turns out, is a chorus girl. Furious at Don's teasing, she throws a real cake at him, only to hit Lina right in the face. Don is smitten with her, but she runs off into the night. Don searches for her for weeks after discovering she was fired, believing himself to be responsible, but Lina tells him while filming a love scene that she made sure Kathy lost her job as an act of revenge and jealousy.
Later, Don finds Kathy working in another Monumental Pictures production and they apologize to each other. She confesses to having been a fan of Don all along and they begin to fall in love.
After a rival studio has an enormous hit with its first talking picture, 1927's The Jazz Singer, R.F. decides he has no choice but to convert the next Lockwood and Lamont film, The Dueling Cavalier, into a talkie. The production is beset with difficulties in capturing sound, but by far the worst problem is Lina's grating voice.
An exasperated diction coach tries to teach her how to speak properly, but to no avail. Don also takes diction lessons (albeit with much better results). The Dueling Cavalier's test screening is a disaster; the actors' speaking is barely audible thanks to the awkward placing of the microphones, Don repeats the line "I love you" to Lina over and over, to the audience's derisive laughter, and in the middle of the film, the sound goes out of synchronization, with hilarious results.
After the premiere, Don, Kathy and Cosmo come up with the idea to turn The Dueling Cavalier into a musical called The Dancing Cavalier, complete with a modern musical number called "Broadway Melody". Don will be able to show off his natural singing and dancing talent, but they are stumped when they must think about what to do with Lina.
Cosmo, inspired by a scene in "The Dueling Cavalier" where Lina's voice was out of sync, suggests they dub Lina's voice with Kathy's. They bring the idea to R.F., who goes ahead with it. When Lina finds out, she is infuriated. She becomes even angrier when she discovers that R.F. intends to give Kathy a screen credit and a big publicity promotion.
Lina, after consulting lawyers, threatens to sue R.F. unless he cancels Kathy's buildup and orders her to continue working uncredited as Lina's voice. R.F. reluctantly agrees to her demands.
The premiere of The Dancing Cavalier is a tremendous success. When the audience clamors for Lina to sing live, Don, Cosmo, and R.F. improvise and get her to lip sync into the microphone while Kathy, hidden behind the stage curtain, sings into a second one.
While Lina is "singing", Don, Cosmo and R.F. gleefully raise the curtain. When Cosmo replaces Kathy at the microphone, the sham becomes obvious. Embarrassed, Lina flees in humiliation. A distressed Kathy tries to run away as well, but not before Don proudly announces to the audience that she's "the real star of the film". The final shot shows Kathy and Don kissing in front of a billboard for their new film, Singin' in the Rain.