Teenager Dorothy Gale lives on a farm in Kansas with her Aunt Em, Uncle Henry and dog Toto, but feels that her aunt and uncle don't understand her ("Nobody Understands Me"). The unpleasant Miss Gulch threatens to call the sheriff after Toto bites her leg. Dorothy wants to escape to a nicer place, somewhere "Over the Rainbow". She runs away from the farm and meets Professor Marvel, who tells her all about "The Wonders of the World". They are interrupted by a twister, and Dorothy runs home for shelter. Inside the farmhouse, she bangs her head on the bedside. The house is borne away by the storm.
Landing in Oz, Dorothy's house flattens the Wicked Witch of the East. Glinda, the Good Witch of the North, greets Dorothy and Toto and tells her where she is. Glinda calls for the Munchkins to "Come Out". These little people are overjoyed at the demise of their wicked tormentor ("Ding Dong the Witch is Dead"). Glinda presents Dorothy with the magic ruby slippers that belonged to the dead witch. This enrages the witch's sister, the Wicked Witch of the West. Glinda tells Dorothy that the Wizard of Oz might be able to help her return home, and how to find him ("Follow the Yellow Brick Road"). Dorothy sets off toward the Emerald City to speak to the great Oz ("You're Off to See the Wizard").
On her way, she meets the Scarecrow, who feels inadequate with a head full of only stuffing ("If I Only Had a Brain"). Dorothy invites him to join her on the journey, hoping the Wizard can help him ("We're Off to See the Wizard"). They soon meet the Tin Man, who is unhappy with his empty tin chest ("If I Only Had a Heart") and invite him to join them on their journey. The Wicked Witch of the West threatens to light the Scarecrow on fire unless Dorothy gives her the ruby slippers; Dorothy refuses. In the dark forest, they encounter a very unhappy Lion, afraid of his own tail ("If I Only Had the Nerve"). He too joins the group on the road to the Emerald City.
Emerging into the light, the friends encounter another obstacle. The Wicked Witch has cast a spell creating a huge field of poppies that puts Dorothy and the Lion to sleep. Glinda counters with a snowfall that nullifies the poison, so the friends may continue on their journey. Arriving at the Emerald City, Dorothy and company persuade the gatekeeper to admit them. They are welcomed with open arms and are groomed in preparation for a meeting with the Wizard ("The Merry Old Land of Oz"). The Wicked Witch flies down into the City with more threats, still angry that she doesn't have the ruby slippers. The four friends and Toto go into the Wizard's chamber. The great Oz appears as a frightening, disembodied head and refuses to grant the group their wishes until they do something for him. He demands: "Bring Me the Broomstick" of the Wicked Witch of the West.
In a forest on the way to the castle of the Wicked Witch of the West, the group try to figure out how to steal the broomstick ("We Went to See the Wizard"). They hide from a group of the Witch's Winkies ("March of the Winkies"). Meanwhile, in her castle, the Witch sends her flying monkeys to capture Dorothy and Toto and bring them to the castle ("Red Shoes Blues"). She imprisons Dorothy and tells her to give up the slippers within the hour or die ("Red Shoes Blues" (reprise)). Dorothy wishes more than ever that she was back at home ("Over the Rainbow" (reprise)). The Scarecrow, Tin Man and Lion consider how to rescue her from the Witch's castle ("If We Only Had a Plan"). They disguise themselves as Winkies and sneak into the castle ("March of the Winkies" (reprise)). They find the Witch and Dorothy. When the Witch tries to attack the Scarecrow, a Winkie hands Dorothy a bucket of water, which she throws over the Witch, melting her. The Winkies are thrilled to be free of the wicked witch ("Hail – Hail! The Witch is Dead").
Dorothy and her friends return with the broomstick to see the Wizard. Toto reveals that the Wizard's fearsome visage is an illusion; he is just an ordinary man. Still, he gives the Scarecrow, Tin Man and Lion tokens of the brains, heart and courage that they already had inside of them. He tells Dorothy that he himself will take her to Kansas in his hot air balloon, appointing the Scarecrow as prime minister of Oz, with the Tin Man and Lion as other ministers ("You Went to See the Wizard"). Just before the balloon flies off, Toto runs into the crowd, and Dorothy retrieves him, missing her ride; she is seemingly stranded in Oz. Glinda appears to tell her that she and Toto had the power to return home all along ("Already Home"). After saying goodbye to her friends, Dorothy clicks her heels together three times, chanting "There's No Place Like Home".
Back in Kansas, Aunt Em and Uncle Henry tell Dorothy that she hit her head and had been unconscious for days. Dorothy insists her adventure in Oz was real, not all a dream, but she is very grateful to be home. As Aunt Em and Uncle Henry leave her alone in her bedroom to rest, a gust of wind blows open her cupboard door, revealing the ruby slippers.