In 1931 Berlin, a young, openly promiscuous American Sally Bowles performs at the Kit Kat Klub. A new British arrival in the city, Brian Roberts, moves into the boarding house where Sally lives. A reserved academic and writer, Brian must give English lessons to earn a living while completing his doctorate. Sally tries to seduce Brian, but he tells her that on three previous occasions he has tried to have sexual relationships with women, all of which failed. They become friends, and Brian witnesses Sally's bohemian life in the last days of the Weimar Republic. When Brian consoles Sally after her father cancels his meeting with her, they become lovers, concluding that his previous failures with women were because they were "the wrong three girls".
Maximilian von Heune, a rich, married playboy and baron, befriends Sally and takes her and Brian to his country estate where they are both spoiled and courted. After a somewhat enigmatic experience with Brian, Max drops his pursuit of the pair in haste. During an argument, Sally tells Brian that she has been having sex with Max, and Brian reveals that he has as well. Brian and Sally later reconcile, and Sally reveals that Max left them 300 marks and mockingly compares the sum with what a professional prostitute earns.
Sally learns that she is pregnant but is unsure of the father. Brian offers to marry her and take her back to his university life in Cambridge. At first, they celebrate their resolution to start this new life together, but after a picnic between Sally and Brian, in which Brian acts distant and uninterested, Sally becomes disheartened by the vision of herself as a bored faculty wife washing dirty diapers. Ultimately, she has an abortion, without informing Brian in advance. When he confronts her, she shares her fears, and the two reach an understanding. Brian departs for England, and Sally continues her life in Berlin, embedding herself in the Kit Kat Klub.
Meanwhile, Fritz Wendel, a German Jew passing as a Protestant, is in love with Natalia Landauer, a wealthy German Jewish heiress who holds him in contempt and suspects his motives. Through Brian, Sally advises him to be more aggressive, which eventually enables Fritz to win her love. However, to gain her parents' consent for their marriage, Fritz must reveal his background, which he does and the two are married by a rabbi.
