It is 3 a.m. on a chilly morning in early December 1933. Six orphans – Molly, Kate, Tessie, Pepper, July and Duffy – are asleep in the dormitory of the Girls' Annex of The New York City Municipal Orphanage. Molly, the youngest, wakes up from a dream and cries out for her mother. This wakes the other orphans, who begin arguing. Annie, age 11, runs in with a bucket. She has been cleaning; this is a punishment from Miss Hannigan, the villainous director of the orphanage. 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 a lullaby about the parents she imagines, but has never known ("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 Miss Hannigan discovers her. Miss Hannigan makes all the orphans get up to scrub floors and strip beds to pay for Annie's misbehavior. Their complaints that it is 4:00 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, the orphans take advantage of the fact that Miss Hannigan is flirting with him and sneak Annie out of the building in a laundry bag. Realizing that Annie has escaped, Miss Hannigan calls for the police as the orphans celebrate ("Hard-knock Life – Reprise").
Annie now finds herself on a street that is lined with tenements. She encounters a mutt that is being chased by dogcatchers. She rescues him and tries to cheer him up by explaining her philosophy that, even if things aren't great today, they're bound to get better in the future ("Tomorrow"). When a policeman makes her prove that the mutt is her dog, she names him Sandy on the spot and then calls him to come to her. The dog miraculously responds, and they become a team.
Some time later, Annie comes upon a Hooverville, a Depression-style shantytown of jerry-built shacks, under a bridge on the East River. The residents of the makeshift town, who have lost their homes and their fortunes in the Great Depression, are cooking stew over an outdoor fire. They blame the former president, Herbert Hoover, for their plight ("Hooverville"). The group befriends Annie and Sandy. Annie tries to cheer them up, insisting that the future will be brighter. A policeman breaks up the crowd, driving the squatters away from their makeshift homes. Annie and Sandy run away.
Back at the orphanage, the girls torment Miss Hannigan, who expresses her disgust at being saddled with the small creatures ("Little Girls"). She has just settled down to enjoy a radio soap opera when a policeman 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 of billionaire, Oliver Warbucks, who wants to invite an orphan to his mansion for Christmas. Grace is instantly drawn to Annie and she demands that Miss Hannigan sign the required papers as she escorts Annie to a waiting limousine. Miss Hannigan can't believe her rotten luck ("Little Girls – Reprise").
Grace brings Annie to Mr. Warbucks' mansion and introduces her to the servants. Annie is in awe of her new surroundings and she is made to feel completely welcome by the staff ("I Think I'm Gonna Like It Here"). Oliver Warbucks arrives. He is a powerful figure in the country and a pivotal player in the current economic crisis. He is taken aback by Annie's appearance in his house, as he had expected the orphan to be a boy and is puzzled by the prospect of dealing with a little girl. Almost immediately, though, 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, treating her to an ice cream soda and a hansom cab ride around Central Park. Grace joins them. As she tours New York, 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 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, but, when Miss Hannigan refuses, he reminds her of their mother's lullaby ("Easy Street"). As they lament their own misfortunes, Miss Hannigan shares the news of Annie's pending adoption by Warbucks. Rooster is determined to use Annie's situation to their advantage.
Back at his estate, Warbucks is talking on the telephone to the President of the United States, Franklin D. Roosevelt. A package from Tiffany & Co. arrives, which contains a silver locket for Annie. Warbucks considers the ways in which adopting Annie will change his life ("Why Should I Change a Thing?")
When Annie comes downstairs, Warbucks tells her that he wants to adopt her and gives her the locket. Instead of the cheerful response that he imagined, Annie begins to weep. When he learns about her dream of finding her parents and the secret of the half-locket that she has treasured for so long, he sets his own feelings aside and orders an exhaustive search for Annie's parents ("You Won't Be an Orphan for Long"). Annie knows that she will find her parents soon ("Tomorrow – Reprise"). Warbucks laments his loss but is resolved to find her real parents.
Annie and Warbucks are guests on Bert Healy's popular radio show. They make a plea for Annie's parents to return, and Warbucks offers $50,000 to anyone who can prove that they are her mother and father. The show closes with the radio actors performing a classic song and dance number ("You're Never Fully Dressed without a Smile"). The orphans are listening to Bert Healy's radio show and singing along ("You're Never Fully Dressed without a Smile – Children"). Miss Hannigan, furious about Annie's good fortune, sends them out of the room.
Rooster and Lily arrive, disguised as Ralph and Shirley Mudge, saying they are Annie's parents. They plan to claim Annie and the $50,000 reward, but they need Miss Hannigan's help. Once they have the money, they plan to do away with Annie and live in the lap of luxury ("Easy Street – Reprise").
Meanwhile, in Washington, D.C., President Roosevelt and members of his cabinet are listening to a popular radio commentator attack the President's policies. Warbucks and Annie arrive in the Oval Office. As Warbucks and the government officials discuss the depressing facts about the economic situation, Annie counters by reminding them to stay optimistic ("Tomorrow – Reprise"). The President reacts to her viewpoint with enthusiasm and makes the cabinet members sing along. When Warbucks and Annie hear the news that hundreds of people who are claiming to be Annie's parents are surrounding the Warbucks mansion, they immediately return to New York. Inspired by Annie's optimism, the cabinet members and the President invent the New Deal.
At the mansion, Annie and Warbucks discover that Grace has already interviewed and dismissed the throngs of people since no one mentioned anything about a locket. The maker of Annie's locket has also reported that the purchasers cannot be traced. It appears that Annie's quest cannot have a happy ending. Attempting to console her, Warbucks declares his own feelings about Annie and her importance in his life ("Something Was Missing").
Finally, Warbucks' plans to adopt Annie are set in motion, as are the preparations for the 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"). Everyone at the mansion becomes involved in the preparations for the festivities. As Supreme Court Justice Brandeis is about to finalize the adoption, 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 on a pig farm. Warbucks convinces them to let Annie spend Christmas with him at the mansion. He says that the Mudges can pick her up the next day; they agree and leave. As Grace escorts Annie upstairs, she remembers having seen Mr. Mudge before. Warbucks calls President Roosevelt to ask a favor.
The next morning, Annie waits apprehensively for the Mudges to claim her. President Roosevelt arrives with the news that the FBI has analyzed the handwriting on the note that Annie's parents left behind, in an attempt to trace their identity. The investigation reveals 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 that 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, another communication from the FBI reveals their true identities. Miss Hannigan tries to save herself by pretending to have no association with Rooster and Lily, but all three are hauled off to jail. Annie introduces the orphans to Warbucks and promises that they will have a much better life in the future ("A New Deal for Christmas"). A huge package arrives for Annie, and, when she opens it... Sandy jumps into her arms!