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Two old gentlemen meet in the rain one night at Covent Garden. Professor Higgins is a scientist of phonetics, and Colonel Pickering is a linguist of Indian dialects. The first bets the other that he can, with his knowledge of phonetics, convince high London society that, in a matter of months, he will be able to transform the cockney speaking Covent Garden flower girl, Eliza Doolittle, into a woman as poised and well-spoken as a duchess. The next morning, the girl appears at his laboratory on Wimpole Street to ask for speech lessons, offering to pay a shilling, so that she may speak properly enough to work in a flower shop. Higgins makes merciless fun of her, but is seduced by the idea of working his magic on her. Pickering goads him on by agreeing to cover the costs of the experiment if Higgins can pass Eliza off as a duchess at an ambassador's garden party. The challenge is taken, and Higgins starts by having his housekeeper bathe Eliza and give her new clothes. Then Eliza's father Alfred Doolittle comes to demand the return of his daughter, though his real intention is to hit Higgins up for some money. The professor, amused by Doolittle's unusual rhetoric, gives him five pounds. On his way out, the dustman fails to recognize the now clean, pretty flower girl as his daughter.
For a number of months, Higgins trains Eliza to speak properly. Two trials for Eliza follow. The first occurs at Higgins' mother's home, where Eliza is introduced to the Eynsford Hills, a trio of mother, daughter, and son. The son Freddy is very attracted to her, and further taken with what he thinks is her affected "small talk" when she slips into cockney. Mrs. Higgins worries that the experiment will lead to problems once it is ended, but Higgins and Pickering are too absorbed in their game to take heed. A second trial, which takes place some months later at an ambassador's party (and which is not actually staged), is a resounding success. The wager is definitely won, but Higgins and Pickering are now bored with the project, which causes Eliza to be hurt. She throws Higgins' slippers at him in a rage because she does not know what is to become of her, thereby bewildering him. He suggests she marry somebody. She returns him the hired jewelry, and he accuses her of ingratitude.
The following morning, Higgins rushes to his mother, in a panic because Eliza has run away. On his tail is Eliza's father, now unhappily rich from the trust of a deceased millionaire who took to heart Higgins' recommendation that Doolittle was England's "most original moralist." Mrs. Higgins, who has been hiding Eliza upstairs all along, chides the two of them for playing with the girl's affections. When she enters, Eliza thanks Pickering for always treating her like a lady, but threatens Higgins that she will go work with his rival phonetician, Nepommuck. The outraged Higgins cannot help but start to admire her. As Eliza leaves for her father's wedding, Higgins shouts out a few errands for her to run, assuming that she will return to him at Wimpole Street. Eliza, who has a lovelorn sweetheart in Freddy, and the wherewithal to pass as a duchess, never makes it clear whether she will or not.