The play takes place on two islands in the South Pacific during World War II, at the edge of the war action. Ngana, Mirah and Jerome the French plantation owner Emile de Becque's three children, are playing on the terrace of their home. Emile comes home from a lunch date with Nellie, a young American nurse. They are beginning to fall in love, in spite of the discrepancy in their ages and cultural backgrounds. Although Emile confesses that he is actually a fugitive from French justice after killing a man, her love for him is unchanged.
Elsewhere on the island a group of Sailors and Marines are joking with Bloody Mary, a colourful Tonkinese woman who makes money selling local wares. Led by Luther Billis, owner of the laundry and an entrepreneur in his own way, the men are trying to rival her business. Billis is looking for an officer to take him over to the alluring island of Bali Ha'i. Joe Cable, a well-born and educated young Lieutenant, arrives on a special mission to set up a spy post on another island.
He wants to recruit Emile to accompany him, which he refuses to do because of the enormous risk and his unwillingness to give up his new-found love for Nellie.
Cable takes a few days off to sail with Billis to Bali Ha’i where Mary introduces him to her daughter Liat and they fall in love at first sight.Meanwhile Emile introduces Nellie to his children and tells her about his dead Polynesian wife. When she hears this, her racial prejudice gets the better of her and she flees in panic, leaving him shocked and desolate.
Act II, two weeks later: During the Thanksgiving show which Nellie has organised, Cable enters, weak from malaria which has prevented him from seeing Liat. Bloody Mary appears with Liat, convinced that he will marry her, but he also is unable to overcome his prejudice and flatly refuses. After Mary, enraged, has dragged Liat away, Nellie joins Cable and while they are talking, Emile enters. She tells him he can’t marry him. In despair he consents to go on the mission with Cable. The mission succeeds, helped by the unlikely hero Billis, but Cable is fatally wounded. Nellie has now realised how much she loves Emile and, regretting her prejudice attitude, goes to care for the children. They are all there to greet him when he returns home, battle-stained but safe.