On a summer evening in London's Covent Garden, a group of assorted people are gathered together under the portico of St. Paul's Church for protection from the rain. Among the group are Mrs. Eynsford-Hill and her daughter, Clara, who are waiting for the son, Freddy, to return with a cab. When he returns in failure, he is again sent in search of a cab. As he leaves, he collides with a young flower girl with a thick Cockney accent, and he ruins many of her flowers. After he is gone, the mother is interested in how such a "low" creature could know her son's name; she discovers that the flower girl calls everyone either "Freddy" or "Charlie." When an elderly gentleman comes into the shelter, the flower girl notes his distinguished appearance and tries to coax him to buy some flowers. This gentleman, Colonel Pickering, refuses to buy the flowers, but he gives the girl some money. Members of the crowd warn the girl against taking the money because there is a man behind her taking notes of everything she says. When the flower girl (Eliza) loudly proclaims that "I am a good girl, I am," the bystanders begin to protest. The note taker, it turns out, is Professor Henry Higgins, an expert in phonetics. His hobby is identifying everyone's accent and place of birth. He even maintains that he could take this "ragamuffin" of a flower girl and teach her to talk like a duchess in three months. At this time, the elder gentleman identifies himself as Colonel Pickering, the author of a book on Sanskrit, who has come to meet the famous Henry Higgins, to whom he is now talking. The two go off to discuss their mutual interest in phonetics.
The next morning at Professor Higgins' house, the two men are discussing Higgins' experiments when the flower girl is announced by Mrs. Pearce, Higgins' housekeeper. The girl, Eliza Doolittle, remembers that Higgins bragged about being able to teach her to speak like a duchess, and she has come to take lessons so that she can get a position in a flower shop. Pickering makes a wager with Higgins, who, in the spirit of good sport, decides to take the bet: he orders Mrs. Pearce to take the girl away, scrub her, and burn her clothes. He overcomes all of Eliza's objections, and Eliza is taken away. At this time, Eliza's father appears with the intention of blackmailing Higgins, but he is so intimidated by Higgins that he ends up asking for five pounds because he is one of the "undeserving poor." Higgins is so pleased with the old fellow's audacity and his unique view of morality that he gives him the five pounds and is immediately rid of him.
Sometime later, Higgins brings Eliza to his mother's house during her "receiving day." Freddy Eynsford-Hill and his mother and sister Clara are also present. These turn out to be the same people whom we saw under the portico in the first act. Now, however, none of the guests recognize that Eliza is the "ragamuffin" flower girl of that night. Everyone is amused with the pedantic correctness of her speech and are even more impressed with Eliza's narration of her aunt's death, told in perfect English, but told with lurid and shocking details. After Eliza's departure, Mrs. Higgins points out that the girl is far from being ready to be presented in public.
Sometime later, Higgins, Pickering, and Eliza return late in the evening. The men are delighted with the great success they have had that day in passing off Eliza as a great duchess at an ambassador's garden party. They are so extremely proud that they totally ignore Eliza and her contribution to the success of the "experiment." Infuriated, Eliza finally throws a slipper at Higgins, only to be informed that she is being unreasonable. Eliza is concerned with what will happen to her now that the experiment is over: Is she to be tossed back into the gutter; what is her future place? Higgins cannot see that this is a problem, and after telling her that all of the clothes that she has been wearing belong to her, he retires for the evening.
The next day, Higgins arrives at his mother's house completely baffled that Eliza has disappeared. He has telephoned the police and is then surprised to learn that Eliza is upstairs. While waiting for Eliza, Mr. Doolittle enters and he accuses Higgins of ruining him because Higgins told a wealthy man that Doolittle was England's most original moralist, and, as a result, the man left an enormous sum of money in trust for Doolittle to lecture on moral reforms. He has thus been forced into middle-class morality, and he and his common-law wife are miserable. He has come to invite Eliza to his wedding, another concession to dreadful middle-class morality.
Eliza enters and agrees to come to her father's wedding. As they all prepare to leave, Higgins restrains Eliza and tries to get her to return to his house. He maintains that he treats everyone with complete equality. To him, he makes no social distinction between the way he would treat a flower girl or a duchess. Eliza is determined to have respect and independence, and thus she refuses to return to Higgins' house. Higgins then admits that he misses her and also admires her newfound independence. He further maintains that she should return, and the three of them will live equally, as "three bachelors." Eliza, however, feels otherwise, and she leaves with Mrs. Higgins to attend her father's wedding.