The story of The Phantom of the Opera begins ("Introduction") with the new manager, Richard, previously president of Northern Railways (and a proud member of the Stock Exchange Choir), arriving at the Paris Opera House. He is greeted by the artists and staff ("Welcome Sir, I'm So Delighted"). The previous managers of the Paris Opera did not last very long, due to problems with the legend of the Opera Ghost, who demands 20,000 francs a month and his own private box. These requests are defied by the adamant and foolish Richard, little knowing the mayhem that will take place if he refuses to accept the Ghost's demands. Madam Giry, the box keeper, warns Richard that he may have upset the "Ghost". She is horrified when Richard demands use of Box Five (the Ghost's box). She knows the “Ghost” won't stand idly by while Richard refuses to accept his demands. She warns Richard to expect a run of horrific events, which they are...though they're as funny as they are fearsome.
The evening performance begins ("Accursed All Base Pursuit of Earthly Pleasure"). The ghost provides his first warning in the form of the murder of Mephistopheles - "You don't exist…" After the performance, Richard's handsome (if somewhat dim) son - Raoul, madly in love with the chorus girl Christine Daae - goes to her dressing room, only to hear her speak with another man. Jealous, Raoul enters the room to find it empty. This "ghost" seems very real, as is his love for Christine and woe betide anyone who gets in his way. ("How Dare She")
A Groom comes to talk to Richard in his office about the disappearance of a horse named Caesar ("Late Last Night I'm In The Cellars"). Richard decides that the man is an idiot and promptly fires him. We catch up with Raoul, the young and betrayed lover, and Christine at a local graveyard ("All Of My Dreams Faded Suddenly"). He is then introduced to the angelic voice of the Angel Of Music ("While Floating High Above"). Christine leaves and The Phantom attempts to throttle Raoul, but is disturbed by a Grave Digger, and runs off. Back at the Opera House, the unfortunate Richard has had to stand by while his son pursues the chorus girl Christine Daae, and now must convince his diva - Carlotta, who feels she is too ill to perform - to sing at the performance later that evening, with the help of his staff ("She Says She's Got The Nodules"). An agreement is made that Christine Daae will sing the role, while Carlotta mimes the act.
This wasn't what The Phantom had in mind ... He'll not cease causing "accidents" and will do all in his power to disrupt the proceedings, including rubbing out the lead singer. At the evening performance, Carlotta mimes the act incorrectly and very clearly out-of-sync with Christine ("What Do I See"). Christine faints before the end of the performance and The Phantom drops a large candelabra on Carlotta.
After the performance, Christine and Raoul meet on the rooftop of the Opera House to discuss running away from the Opera House and The Phantom together. But The Phantom isn't very far away at all ... He appears from behind the statue of Apollo and towers above them ("To Pain My Heart Selfishly Dooms Me"). Christine and Raoul leave the roof, leaving The Phantom alone. An Old Man enters, throwing bird-seed down for the pigeons on the Opera House's roof. The Phantom's hurt turns to anger, and he throws the unfortunate man off the building. The Phantom screams that Christine will be his and the first act ends.
A performance of Faust begins with Christine singing the lead role of Marguerite ("Ah! Do I Hear My Lover's Voice?"). However, during the song there's an unscheduled blackout and when the lights come back up, Christine has disappeared. The show quickly adjourns and the rest of the cast search high and low for her all over the Opera House, taking their lanterns into the audience ("No Sign! I See No Sign!"). But to no avail. The scene switches to The Phantom's underground domain where he has kidnapped Christine in his boat and ties her to a post at his mist-shrouded dock before rowing slowly back into the darkness, leaving Christine behind ("Somewhere Above The Sun Shines Bright").
Meanwhile, the search party above ground migrates to the boiler room and The Persian reveals his true identity, and fills us in on the Phantom's history ("Born With A Monstrous Countenance"). Raoul searches for a way down to the cellars below the Opera House ("In The Shadows, Dim And Dreay"). He succeeds and slips through a manhole with the rest of the group, into a boiler room. However things quickly heat up, literally, as The Phantom traps them inside. It looks like the end for the motley group, and they break into a chorus of ("What An Awful Way To Perish").
The final scene takes place in the Phantom's Chapel, with his organ and its unkempt riot of sheet music as a center-piece. He seems determined to wed Christine and expresses his love for her ("Ne'er Forsake Me, Here Remain"). As the song ends, Christine tears off his mask and The Phantom screams in anger and shame, hiding his face from Christine. His sobs fade and he turns back, with a determined and violent look in his eyes, and produces a Priest and Chorus Girl to bear witness to the forced marriage between him and Christine. But just in time, Raoul, The Persian and the rest of the group burst in, having escaped the Boiler Room and come through The Phantom's traps. The Phantom, suddenly finding himself in a tight spot, produces a knife and pulls Christine in front of him - a union sealed in death seems his only option…