The show opens as the citizens of Oz celebrate the death of the Wicked Witch of the West. Glinda descends onto the stage and confirms the circumstances of the Witch's melting. The remainder of the plot forms an extended flashback through the events of Glinda's and the Witch's lives. It is at Shiz University that Glinda, then Galinda Upland, first encounters Elphaba Thropp, the daughter of the governor of Munchkinland, who is ostracized for her electric-green skin; they take an immediate dislike to each other. In a moment of anger, trying to help her sister Nessa, Elphaba reveals an innate magical talent, which impresses Madame Morrible, the "headshiztress" of Shiz; she notes that Elphaba's talents may be of use to the Wizard of Oz, and promises to ask him for an audience.

Galinda and Elphaba, meanwhile, espouse their mutual loathing in a duet. The audience is introduced to Doctor Dillamond, a Goat and Shiz University's only Animal professor, whose history class is interrupted by an anti-Animal demonstration. After dismissing the class, he confides in Elphaba that things in Oz are not what they seem to be; something is causing the Animals of Oz to lose their powers of speech. Fiyero Tiggular, a Winkie prince, arrives at Shiz and immediately impresses his own brand of cavalier, carefree living on the students. Fiyero organizes a party at a local ballroom; Galinda, while preparing, discovers a black pointed hat in a box and gives it to Elphaba as a “present”; Elphaba arrives wearing the hat, only to be ridiculed. Defiant, she proceeds to dance alone and without musical accompaniment. Feeling guilty, Galinda joins her on the dance floor, marking the start of a new friendship between the two.

After the dance, Galinda and Elphaba talk in their room; Galinda decides to give her new friend a makeover and to make her popular. The next day, Ozian officials take away Doctor Dillamond. The new history teacher arrives with a caged lion cub (who will turn out to be the Cowardly Lion) as the subject of an in-class experiment, revealing that Animals that are kept in cages never will learn how to speak. Outraged, Elphaba and Fiyero steal the cub and set it free. The two hint that they may have feelings for each other, but Fiyero leaves, embarrassed. Elphaba takes refuge under a bridge and regrets that it would be impossible for someone like Fiyero to love someone like her. Madame Morrible finds her 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. 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 seems not to notice, and Elphaba, feeling bad for Glinda, invites her along to see the Wizard.

After a day of sightseeing in the Emerald City, 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. 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. Showing her how powerful she really is, the Wizard reveals a cage full of winged monkeys, 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 declaring to all of Oz that Elphaba is a "Wicked Witch" and is to be distrusted. 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 flies off, promising to fight the Wizard with all of her power.

ACT TWO

A few years have passed, and Elphaba's exploits have earned her the title "The Wicked Witch of the West". Glinda and Morrible hold a press conference to announce Glinda's surprise engagement to Fiyero. Meanwhile, Elphaba arrives at the governor's residence in Munchkinland seeking refuge; Nessarose, now the governess, criticizes Elphaba for not using her newfound powers to help her sister. Guilty, Elphaba enchants Nessarose's jeweled shoes, enabling her to walk.

Boq, Nessarose's servant, is summoned and reveals that his affection for Nessarose was put on and his heart lies with Glinda. Furious, Nessarose miscasts a spell from the Grimmerie, accidentally causing Boq's heart to shrink. While Elphaba attempts to save him, Nessarose reflects on how her obsession with Boq has led her to oppress the Munchkins. Elphaba saves Boq by turning him into the Tin Woodman; horrified, Nessarose lays the blame with Elphaba. Elphaba returns to the Wizard's palace in order to free the rest of the winged monkeys. The Wizard attempts to regain her favor by agreeing to set them free .

Upon discovering a now-speechless Doctor Dillamond among the monkeys, Elphaba rejects his offer and attempts to escape, but runs into Fiyero. Confirming his true love for Elphaba, he runs off with her. Glinda sees this and is crestfallen that those closest to her have betrayed her. In an attempt to capture Elphaba once and for all, Madame Morrible decides to create a cyclone that will endanger Nessarose. In a dark forest, Fiyero and Elphaba express their love, but are interrupted when Elphaba senses that her sister is in danger. She flies off to help, but it is too late, arriving just as Glinda sends Dorothy and Toto off along the Yellow Brick Road. The palace guards capture Elphaba, but Fiyero intervenes and allows Elphaba to escape before surrendering himself. The guards take him to a nearby cornfield to be tortured until he tells them of Elphaba's whereabouts.

At her castle, Elphaba tries to cast any spell that she can to save Fiyero, but thinking that she has failed, she begins to accept her reputation as "wicked". Meanwhile, the Citizens of Oz and Boq prepare a witch-hunt. Seeing this, Glinda travels to Elphaba's castle to persuade her to let Dorothy go, but Elphaba refuses. She makes Glinda promise not to clear her name and to take charge in Oz, and the two confirm a true friendship. As the mob arrives at the castle, Dorothy runs in and throws a bucket of water on Elphaba, melting her. Glinda, unsure of what has happened, sees that all that remains of her friend is her black hat and elixir vial.

After mourning Elphaba's death, Glinda takes the elixir vial to the Wizard, revealing the fact that he is Elphaba's father after having had an affair with her mother. Glinda tells the Wizard to leave Oz in his balloon and sends Morrible to prison, before preparing to face the citizens of Oz, returning to the opening scene of the show. Fiyero, whom Elphaba had turned into the Scarecrow, opens a trapdoor in Elphaba's castle. Elphaba, very much alive, emerges and the two are happily reunited. 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 forever as the cast performs the final song.