We begin at the poorest, filthiest urinal in town. Officer Lockstock, a policeman, enters and surveys the scene. He greets the audience. Penelope Pennywise and Bobby Strong enter, discussing the Old So-and-so who was recently carted off to Urinetown. Lockstock tells the audience that Urinetown, itself, is a mythical place that they won't see until Act II, but Urinetown, the musical, is starting now. Little Sally enters and she and Lockstock discuss the dangers of too much exposition in a show. They then proceed to explain that there is a water shortage and public bathrooms have been replaced by private toilets. The fee to use these public bathrooms is controlled by a private company, the Urine Good Company, that keeps prices high. Since using the bushes is illegal, Little Sally counts her pennies in hopes of using the urinal ("Urinetown").
An ingénue type named Hope enters, looking for the Urine Good Company. Bobby directs her towards the gleaming tower on a distant hill. They have a moment. Bobby's pa, Old Man Strong, doesn't have enough money for the fee. He begs Bobby to let him go for free. Penny, however, will have none of it. After 20 years of drought, everyone has to make sacrifices ("It's a Privilege to Pee"). Old Man Strong can't take it anymore and intends to use a wall to relieve himself. Lockstock and his partner, Barrel, remind him that breaking the Public Health Act is an exiling offense, and Old Man Strong is dragged off to Urinetown ("It's a Privilege to Pee – Lockstock's Reprise").
The scene moves to the executive offices of the Urine Good Company. Caldwell B. Cladwell, the president of the UGC and resident villain, is in a meeting. Cladwell is convinced that new fee hikes will breeze through the legislature, while Senator Fipp thinks that there will be unrest if it does. Hope enters. It turns out that she is Cladwell's daughter, back from university. She is also her father's new fax/copy girl. Cladwell insists that she say a few words, so she makes a speech that praises the company. Cladwell interjects and his fellow execs praise him ("Mr. Cladwell").
Later that evening, Officers Lockstock and Barrel run into Little Sally counting her pennies. Lockstock gives her a coin and ushers her home. When she leaves, the officers discuss being exiled to Urinetown and reminisce about other Urinetown victims ("Cop Song"). Hope enters after a long day of faxing and copying and runs into Bobby, who is still smarting from the removal of his father. Bobby is feeling cold and empty because he didn't help his father, and Hope suggests that he listen to his heart. He doesn't realize that he has a heart, nor does he know how to listen to it. She teaches him ("Follow Your Heart"). They say goodnight and kiss.
Lockstock and Little Sally appear, seemingly out of nowhere; she asks Lockstock if Hope loves Bobby, and Lockstock confirms that she does – he's the hero... she has to love him. Little Sally then asks about Urinetown. Lockstock still can't tell her but does slip and reveals there is actually no "Urinetown." They just kill people. The two depart as the next scene begins.
The next morning, new fee hikes are announced, much to the anguish of the poor citizens. Bobby arrives at work after a long night of thinking about what happened to his father. He wonders if the law is wrong. Penny tells Bobby to get his head out of the clouds. Bobby, however, dreams of a beautiful world where everyone is free. Despite Penny's protests, Bobby let's everyone, including his mother, into the urinal for free ("Look to the Sky").
In the offices of UGC, Cladwell congratulates Fipp on the passage of the new legislation. Penny enters and tells Cladwell that there is rioting at her amenity, and that Bobby Strong is letting people pee for free. Cladwell wants to crush the rebellion, but Hope suggests that her father listen to Bobby's heart. She thinks that life should be beautiful, but Cladwell explains that life is a beating – you either beat or get beaten ("Don't Be the Bunny")
Back at the poorest, filthiest urinal in town, Little Sally asks Lockstock what is happening while Bobby lets the masses into the urinal. Lockstock informs her and the audience that it is the Act One finale, where Cladwell arrives to snuff out the uprising! During the hubbub, Bobby and Hope have a moment where they confront the lies and misconceptions. Cladwell then warns that Bobby's rush for freedom will have dangerous consequences, but Bobby doesn't care. In order to ensure their escape, the rebels kidnap Hope and run off ("Act 1 Finale").
The second act begins with the rebels holed up in a secret hideout – identified by an indiscreet sign – where they have Hope tied up. As they anxiously await Bobby's return, they theorize about where Urinetown actually is. Simultaneously, Cladwell and his henchman, Bobby, and Little Sally each theorize what Urinetown is with the audience. The verdict: Urinetown is your town if you're hopeless, down and out ("What Is Urinetown?")
Inside the hideout, the rebels wonder what to do with their hostage, Hope. They want to take out all of their anger and frustration on her and kill her ("Snuff That Girl"). Bobby appears and reminds them that the purpose of their revolution was to ensure that no man or woman could be denied their essential humanity due to the condition of their pocketbook ("Run, Freedom, Run"). Penny then arrives. She tells Bobby that Cladwell wants his amenities up and working and is willing to discuss a solution. He agrees, much to the gang's skepticism. Hope is left with the rebels as collateral, and Bobby and Penny leave for the meeting. Before he goes, he tells Hope to look for the answer to their problems in her heart. She tries ("Follow Your Heart – Reprise").
Later, at the offices of Urine Good Company, Cladwell meets with Bobby. He proposes an offer to Bobby: a load of cash and full amnesty to all of those involved, in exchange for an end to his rebellion and agreement of returning to the improved fee schedule. Bobby refuses the cash and tells Cladwell that all he wants is free access to the amenities for all. Bobby's wish will not be granted, and Cladwell has him sent to Urinetown, even if it has dire consequences for Hope. Realizing how ruthless Cladwell actually is, Penny and Fipp wonder if he is worthy of the trust that they put in him ("Why Did I Listen to That Man?"). Lockstock and Barell take Bobby to the top of the UGC building roof – it turns out that "Urinetown" really is just death. Without hesitation, they hurl Bobby off the building... to his untimely death.
Back at the secret hideout, Little Sally informs the rebels that she saw Bobby being thrown off a building, and that his last words were that he loved Hope. With help from Bobby's ghost, Little Sally tells Hope and the rebels that they must fight for what they know is right ("Tell Her I Love Her"). In a fit of rage, the rebels decide that they must kill Hope as revenge for Bobby's death, but Penny – who turns out to be Hope's mother – offers her life instead. Hope, in seeing Penny's reform, realizes that, if she can change, maybe Urinetown can change. She tells the rebels that, if they kill her, they kill the rebellion. However, if they let Hope lead, they will win. The rebels agree to follow her and march towards Cladwell's headquarters. Hope confronts her father, and he tells her that love is not as important as food, water and shelter... as well as piles and piles of cash. He is promptly taken away to Urinetown ("We're Not Sorry").
Hope proceeds to declare that day a brand new day, a day of hope. Lockstock reappears, acting as a narrator, to inform the audience that Hope opened up the toilets for all. They even renamed the UGC to the Bobby Strong Memorial Toilet Authority and operated for the benefit of the public. But, as originally predicted, it wasn't long before the water disappeared all together; many died. It turns out that, despite being a tyrant, Cladwell's methods did effectively regulate water consumption. Hope's desire for the people's love caused her to abandon regulation and, in the end, the people recognized their town for what it was: Urinetown ("I See a River").