In the summer of 1958, local boy Danny Zuko and vacationing Sandy Olsson meet at the beach and fall in love. When summer comes to an end, Sandy—who is going back to Australia—frets that they may never meet again, but Danny tells her this is "only the beginning." Later on, at the start of Danny's senior year at Rydell High School, he resumes his role as the leader of the T-Birds greaser gang, consisting of his best friend Kenickie, plus Doody, Sonny, and Putzie. The Pink Ladies, a clique of greaser girls, also arrive, consisting of leader Rizzo, Frenchy, Marty, and Jan.
After Sandy's parents decide not to return to Australia, she enrolls at Rydell and befriends Frenchy, who is planning to drop out of school to become a beautician. Unaware of each other's presence at Rydell, Danny and Sandy recount the events of their brief romance to their respective groups without saying the other's name ("Summer Nights"). Sandy's version emphasizes the romance of the relationship, while Danny's version is more sexual.
When Sandy finally mentions Danny's name, Rizzo arranges a surprise reunion for them, but Danny maintains his bad-boy attitude in front of his friends and Sandy storms off in tears. Frenchy invites the girls to a pajama party, but Sandy falls ill from the sight of blood after Frenchy pierces her ears. While Sandy is out of the room, Rizzo starts to make fun of her ("Look at Me, I'm Sandra Dee"). Sandy goes outside and starts to think of Danny, and how much she loves him even though he hurt her ("Hopelessly Devoted to You"). The T-Birds come to Frenchy's house so Danny can apologize to Sandy, but he leaves after they taunt him about her. Rizzo departs with Kenickie to have sex with him, during which his condom breaks. They are disturbed by Leo, leader of the T-Birds' rival gang, the Scorpions, and his girlfriend Cha-Cha.
Kenickie unveils a used car, Greased Lightnin’, which he plans to restore for a drag race with the Scorpions ("Greased Lightnin’"). Sandy begins dating Tom, a jock, and Danny turns to Coach Calhoun to get into sports to impress her, eventually becoming a runner. He reunites with Sandy and they attempt to go on a date, but their friends crash it, and Kenickie and Rizzo argue and split up. Left alone, Frenchy is visited by a guardian angel who advises her to return to Rydell after a mishap in beauty class leaves her with candy-pink hair ("Beauty School Dropout").
The school dance arrives, broadcast live on television and hosted by Vince Fontaine, who flirts with Marty. Rizzo and Kenickie attempt to spite one another by bringing Leo and Cha-Cha as their dates. Danny and Sandy go together and dance well during the chaotic hand jive contest ("Born to Hand Jive"); just before it ends, Sonny pulls Sandy off the dance floor and Cha-Cha cuts in to win with Danny, causing Sandy to leave the event broken-hearted.
Danny tries to make it up to Sandy by taking her to a drive-in theater and giving her his ring to wear ("Alone at a Drive-in Movie"), but Sandy leaves in anger after he forces himself on her ("Sandy"). Meanwhile, Rizzo fears she is pregnant after missing a period and confides in Marty, but Marty tells Sonny and he inadvertently spreads the rumor to Kenickie, the apparent father, though Rizzo denies this to him. Rizzo starts to be laughed at by other girls, and she realizes that she isn't as tough as she seems ("There Are Worse Things I Could Do").
On race day, Kenickie suffers a concussion when hit by his own car door, so Danny takes the wheel. He and Leo race until Leo spins out and leaves humiliated, making Danny the victor. Sandy watches from afar, concluding she still loves Danny, and decides to change her attitude and look to impress him; she asks Frenchy for help to achieve this ("Look at Me, I'm Sandra Dee (Reprise)").
On the last day of school, Principal Greta McGee and her assistant Blanche sob about the departing class. Rizzo discovers she is not pregnant and reunites with Kenickie. Danny has lettered in track but is shocked when Sandy arrives dressed as a female T-Bird. They confess their mutual love and reconcile ("You're the One That I Want"). The class celebrates their graduation at the fair on school grounds ("We Go Together"). Sandy and Danny depart in a revamped Greased Lightnin’, which takes flight ("Grease").
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