May 3, 1962. Tracy Turnblad, a cheerful, rotund high school student living in Baltimore, Maryland steps out of her apartment ("Good Morning Baltimore"), only to endure a day’s worth of school so she and her best friend Penny Pingleton can race home to view their favorite TV show, The Corny Collins Show. The program, a teen dance show, is broadcast from Baltimore’s station WYZT on weekday afternoons ("The Nicest Kids in Town").

The teenagers featured on the show attend Tracy and Penny's school, among them the arrogant and wealthy Amber Von Tussle and her boyfriend Link Larkin, the lead male dancer on the show. Amber’s mother, Velma manages station WYZT and goes out of her way to make sure that Amber is prominently featured and that The Corny Collins Show remains a racially segregated program. Corny Collins) and all of his "Council Members" are white; black kids are only allowed on The Corny Collins Show on "Negro Day", held the last Tuesday of each month and hosted by local R&B radio disc jockey Motormouth Maybelle, who also owns her own record shop on North Avenue.

Tracy's reclusive laundress mother Edna and Penny's strict  Catholic mother Prudy disapprove of their daughters' fascinations with the program; Tracy's father, Wilbur, a joke-shop proprietor, is far more lenient. On one day's show, Corny Collins announces that one of his Council Members is going on a leave of absence, and that auditions for a replacement will be held the next morning during school hours. When Tracy attends, Velma rejects her at the audition for being overweight and supportive of integration ("The Legend of Miss Baltimore Crabs"). Tracy is sent to detention for skipping school, where she learns that the “Negro Day” kids practice their dances in the detention hall. Tracy befriends the students' best dancer, Motormouth Maybelle's son Seaweed, who teaches Tracy several R&B dance moves. As Tracy leaves detention, she accidentally bumps into Link and dreams of a life with him ("I Can Hear the Bells"). At a record hop, Tracy’s new moves attract the attention of Corny Collins ("Ladies' Choice") and he appoints her to the Council ("The Nicest Kids in Town (Reprise)").

Tracy quickly becomes one of Corny's most popular Council Members. This threatens Amber's chances to win the show's yearly "Miss Teenage Hairspray" pageant ("The New Girl in Town") and her relationship with Link, as he grows fonder of Tracy, whose popularity earns her a sponsorship offer from clothes salesman Mr. Pinky. The slightly off-centered salesman suggests that Tracy be the spokesgirl for his Hefty Hideaway boutique. Tracy convinces Edna to accompany her to the Hefty Hideaway and act as her negotiating agent, and in the process, ends her mother's agoraphobia ("Welcome to the 60’s").

At school, Tracy introduces Seaweed to Penny, where the two are instantly attracted to one another. One afternoon, Amber deliberately arranges for Tracy to be sent to detention. Link soon follows by purposely causing a disturbance. There, Seaweed invites the girls and Link to follow him and his sister Little Inez to a platter party at Motormouth Maybelle's record shop ("Run and Tell That"). When Edna finds Tracy at the shop, she tries to take her home, until Maybelle convinces her of staying and makes Edna prouder of her image ("Big, Blonde and Beautiful"). At the party, Maybelle informs everyone that Velma has canceled "Negro Day". Tracy, in reply, suggests that Maybelle and the others stage a protest march, which they plan for the next afternoon, a day before the "Miss Teenage Hairspray" pageant. Realizing that he has a chance at stardom by singing at the pageant, Link does not attend the demonstration, disappointing Tracy. After the party, Edna decides to go to Wilbur's shop and flirt with him. Velma, suspecting such, goes to Wilbur's shop to seduce him ("Big, Blonde and Beautiful (Reprise)"). Edna arrives and, as Velma expects, accuses Wilbur of infidelity. Edna, out of hatred for Velma, forbids Tracy from being on the show. Wilbur and Edna eventually reconcile, being influenced to do so by Tracy ("(You’re Timeless to Me").

The next morning, Tracy sneaks out of the house to join the protest march ("I Know Where I’ve Been"), which comes to a halt at a police roadblock set up by Velma. The entire company of protesters is arrested; of them, Tracy manages to escape. She flees to the Pingleton household, where Penny hides her in a basement fallout shelter. Prudy catches Tracy trying to hide and calls the police before tying Penny to her bed upstairs with a jump rope. Seaweed and his friends, having been bailed out by Wilbur, help Tracy and Penny escape. The kids then plan to enter and join the Miss Teenage Hairspray pageant. Meanwhile, Link visits Tracy’s house to look for her and realizes that he is as much in love with her as she is with him. Seaweed and Penny also acknowledge their love during the escape from her house ("Without Love").

With the pageant underway ("(It’s Hairspray"), Velma places police officers around and inside station WYZT to prevent Tracy from entering. She also changes the tallies of the pageant's telephone lines so Amber is guaranteed to win. Penny arrives at the pageant with Edna incognito, while Wilbur, Seaweed, and the Negro Day kids help Tracy infiltrate the studio by hiding her in a decorative "Ultra Clutch" hairspray can outside the studio. The officers use it as a battering ram to beat down the doors after the Negro Day kids lock them out. Tracy is able to escape and sneak into the pageant in time to participate in the Miss Teenage Hairspray dance contest. Link breaks away from Amber to dance with Tracy; later, he pulls Little Inez, who has just arrived at WYZT with Maybelle, to the stage to dance in the pageant.

Against all expectations, Little Inez receives the most votes and wins the pageant, officially integrating The Corny Collins Show. A perturbed Velma loudly declares her frustration, informing her daughter of the tally-switching scheme. Unknown to Velma, Edna and Wilbur have turned a camera on her, and Velma's outburst is broadcast on the air, causing her to be fired from the program. Meanwhile, The Corny Collins Show set explodes into a celebration as Tracy and Link cement their love with a kiss ("You Can’t Stop the Beat").