It is 3 A.M. on a chilly morning in early December 1933. Six orphans are asleep in the dormitory of the Girls' Annex of The New York City Municipal Orphanage. The orphans are Molly, the littlest, who is six; Kate, the next-to-littlest, who is seven; Tessie, the crybaby, who is ten; Pepper, the toughest, who is twelve; July, the quietest, who is thirteen; and Duffy, the biggest, who is also thirteen. Molly is just waking up from a dream and crying out for her mother. The other orphans wake up and begin arguing. Annie, who is eleven and has been up cleaning, runs in. Annie comforts Molly, who begs her to read the note that Annie's parents left when they abandoned her. Pepper reminds the group that they also left Annie one-half of a silver locket and kept the other half with a promise to reclaim her one day. Annie then pulls Molly close to her and sings about the parents she imagines, but has never known. The other orphans join her ("Maybe"). Thinking about her parents inspires Annie to run away from the orphanage to search for them. She packs a bag and is ready to leave when she is discovered by Miss Hannigan, the villainous director of the orphanage. Miss Hannigan makes all the orphans get up to scrub floors and strip the beds to "pay" for Annie's misbehavior. Their complaint that it is four o'clock in the morning fall on deaf ears. As they clean, the orphans complain about their difficult circumstances ("Hard-Knock Life").

In the morning, when Bundles McCloskey, the laundry man, comes to make a pick-up from the orphanage, the orphans take advantage of the fact he is flirting with Miss Hannigan, and sneak Annie out of the building in a laundry bag. Realizing Annie has escaped, Miss Hannigan calls for the police as the orphans celebrate ("Hard-Knock Life – Reprise").

Annie is on a street lined with tenements when she encounters a mutt being chased by dog catchers. She rescues him and sings "Tomorrow," expressing her feelings that both she and the dog have to believe everything will be fine for them in the future. When a policeman makes her prove the mutt is her dog, she names it Sandy on the spot and then calls it to come to her. The dog miraculously responds, and they become a team.

Back at the orphanage, Miss Hannigan is being tormented by the orphans. She expresses her disgust with her lot in life as the keeper of "Little Girls." The policeman arrives and returns Annie. As Miss Hannigan is threatening Annie, Grace Farrell, an attractive and well-dressed young woman, enters, carrying an attaché case. She is the private secretary to the billionaire, Oliver Warbucks, who wants to invite an orphan to his mansion for Christmas. Annie campaigns for the opportunity, but Miss Hannigan does everything in her power to discredit Annie. Grace is instantly drawn to Annie and is determined to bring her to the Warbucks mansion. She demands that Miss Hannigan sign the required papers, and then she escorts Annie to a waiting limousine. Miss Hannigan fumes as the orphans celebrate ("Little Girls – Reprise").

Grace brings Annie to Mr. Warbucks' mansion and introduces her to the servants. Annie is in awe of her new surroundings, but she is made to feel completely welcome by the staff ("I Think I'm Gonna Like it Here"). Oliver Warbucks arrives on the scene. He is a powerful figure in the country and a pivotal player in the current economic crisis. He rarely stops thinking about business and is taken aback by Annie's appearance in his house. He had expected the orphan to be a boy and is puzzled by the prospect of dealing with a little girl. Yet, almost immediately, he feels a deep connection to Annie's spunk and personality, which remind him of his own humble beginnings. Contrary to his usual behavior, he decides to take a night off. Warbucks escorts Annie to see a movie at the Roxy, then treats her to an ice cream soda and a hansom cab ride around Central Park.

As she tours New York with Warbucks and Grace, Annie sees the city in a new way ("N.Y.C.") At the end of the evening, Annie is exhausted and Warbucks carries her home. As they leave Times Square, the faithful Sandy enters and then forlornly wanders off in search of Annie.

Grace arrives at the orphanage to tell Miss Hannigan that Oliver Warbucks wants to adopt Annie. She leaves just as Miss Hannigan's brother, Rooster, arrives with his girlfriend, Lily. Rooster has come to borrow money from his sister. Miss Hannigan shares the news of Annie's pending adoption by Warbucks. The siblings lament their misfortunes ("Easy Street").

Warbucks is talking to the President of the United States, Franklin D. Roosevelt. A package from Tiffany & Co. arrives, containing a silver locket for Annie. Warbucks tells Annie that he wants to adopt her and gives her the locket. Instead of the happy response he imagined, Annie begins to weep. When he learns about her dream of finding her parents and the secret of the half-locket she has treasured for so long, he sets his own feelings aside and orders an exhaustive search for Annie's parents. Warbucks laments his loss, but is resolved to find Annie's real parents ("You Won't Be an Orphan for Long").

Annie and Warbucks are guests on the popular Bert Healy radio show ("Maybe – Reprise"). They make a plea for Annie's parents to return, and Warbucks offers $50,000 to anyone who can prove they are her mother and father.

The orphans are listening to Bert Healy's radio show and sing their own version of Bert Healy's signature song, "You're Never Fully Dressed without a Smile." Miss Hannigan, furious about Annie's good fortune, sends them out of the room. Rooster and Lily arrive, disguised as Ralph and Shirley Mudge, claiming to be Annie's parents. They reveal their identity to Miss Hannigan and share their plot to claim Annie and the $50,000 reward. Once they have the money, the trio plan to do away with Annie and live in the lap of luxury ("Easy Street – Reprise").

At the mansion, Annie and Warbucks discover that Grace has interviewed and dismissed hundreds of people claiming to be Annie's parents, but no one mentioned anything about a locket. The F.B.I. has also reported that the purchasers of the locket cannot be traced. It appears that Annie's quest cannot have a happy ending. Warbucks declares his intention to adopt Annie, and Annie accepts. Preparations are set in motion for a party to celebrate the adoption. Annie and Warbucks express their delight with the idea of becoming father and daughter ("I Don't Need Anything but You"). Just then, Rooster and Lily, disguised as Ralph and Shirley Mudge, appear with the other half of Annie's locket.

They also have Annie's birth certificate, which has been supplied by Miss Hannigan. They announce their intention to take Annie home to live with them in New Jersey. Warbucks convinces them to let Annie spend Christmas with him at the mansion. The Mudges can pick her up the next day. Rooster and Lily agree and leave. Everyone toasts Annie Mudge, but Annie breaks into tears and runs upstairs. Grace tells Warbucks that she feels she has seen Mudge before.

The next morning, Annie waits apprehensively for the Mudges to claim her ("Maybe – Second Reprise"). President Roosevelt arrives with the news that the F.B.I. has analyzed the handwriting on the note Annie's parents left behind to trace their identity. The investigation revealed that her real parents were named David and Margaret Bennett and that they are dead. The Mudges are impostors. Annie and Warbucks declare their love for each other. They realize only Miss Hannigan could have given the Mudges the locket and birth certificate. Miss Hannigan arrives with the orphans to celebrate Christmas. As the Mudges arrive to claim Annie, another communication from the F.B.I. reveals their true identities as Rooster and Lilly. Miss Hannigan tries to save herself by pretending to have no association with them and begins leading the orphans in Christmas carols. All three are hauled off to jail, and Roosevelt promises everyone that they will have a much better life in the future... a "New Deal" ("Tomorrow – Reprise"). A huge package arrives for Annie; when she opens it, Sandy jumps into her arms.