In the hold of the convict ship Sirius, the convicts witness an (off-stage) flogging and express fear about their future. In Sydney Cove, an unnamed Aboriginal Australian witnesses the arrival of the first fleet. Throughout the play, he comments on the British settlement's effect on the indigenous populations, reacting with curiosity, confusion, and finally fear.
Some time after arriving in Sydney, Governor Arthur Philip, Captain David Collins, Captain Watkin Tench, and Midshipman Harry Brewer debate the purpose of prison: should it be to punish or rehabilite?; and the nature of criminal tendencies: are they innate or acquired? When Tench mentions that the convicts consider hanging to be "entertainment," Philip wonders if they could be offered something else. He suggests that the convicts could stage a play, but nevertheless orders Harry to find a hangman and execute three men who have been convicted of stealing food.
After hanging two of the thieves, Harry is plagued by guilt, especially as one of the thieves, Handy Baker, was Harry's rival for the affection of Duckling Smith, a young convict woman. Harry tells Second Lieutenant Ralph Clark about the Governor's idea to have the convicts stage a play and Ralph decides to take this project on, hoping to get the Governor to notice him.
Ralph chooses George Farquhar's restoration comedy The Recruiting Officer and holds auditions. Some of the convicts who audition are Meg Long, an aged prostitute; Robert Sideway, a flamboyant pickpocket; the shy Mary Brenham; her more outspoken friend Dabby Bryant; and the hardened criminal Liz Morden. Ralph offers Mary the main female role of Silvia and reluctantly agrees that Dabby can play Rose. Liz Morden is offered the role of Melinda.
One evening, the officers discuss theatre, punishment, criminality and morality, and debate the value of Ralph's project. Major Ross, his acolyte Captain Campbell, and the pragmatic Captain Tench express conservative opinions and oppose the play, which is defended vehemently by Philip, Collins and Ralph Clark. Collins conducts a vote and with the majority in favour, Ralph is allowed to start rehearsals.
Duckling complains that Harry is always watching her, leaving her no freedom. To appease her, he says that he will let her take part in the play. Dabby and Mary start learning their lines. Mary feels inadequate to play a noble lady, as she is ashamed of having sold herself to a sailor on the ship for food. Dabby argues that Mary was no virgin and that she might otherwise not have survived the voyage. Liz interrupts them and demands to be included, but Dabby becomes resentful when it becomes clear that Liz can't read. Their fight is broken up by James “Ketch” Freeman, the hangman. Freeman visits Ralph in his tent, claims that he is innocent of the murder that got him transported to Australia. He explains why he agreed to take on the office of hangman; having been convicted for stealing food, he was told “hang or be hanged”. He finally begs Ralph for a part in the play. A Jewish convict, John Wisehammer, engages Mary in a conversation about the meanings and sounds of words; she suggests he also take part in the play.
At the first rehearsal, two actors, Cable and Arscott, are missing; Sideway overacts, and Liz can't act at all. A convict named Black Caesar arrives and asks to play a servant. The rehearsal is interrupted by Ross and Campbell, who inform Ralph that Cable and Arscott have escaped. Ross arrests Caesar, who initially went with the escapees but came back. He also arrests Wisehammer, because Cable was last seen near Wisehammer’s hut; and Liz, accused of helping Cable steal food from the stores. The rehearsal is left in shambles.
In prison, Liz tells Wisehammer her life story. Wisehammer protests that he is innocent. Caesar dreams of making another escape attempt and returning to Madagascar. John Arscott, who has been recaptured, desperately cries out that escape is impossible. Sideway, Duckling and Mary arrive in prison so they can continue to rehearse.
Ralph tells Philip that, because half of his actors are in prison, he wants to stop the play, but Philip exhorts him to continue trying, making Ralph see the much larger meaning that the play has for the colony. Philip especially advocates for Liz Morden, as he wants to make an example of her – through redemption.
In his tent, Harry Brewer sees the ghosts of the two men he hanged, including his rival Handy Baker. He shouts for Duckling, but when she arrives, he cannot trust her, saying that the "ghost" told him that Handy and Duckling had been on the beach together.
On Philip’s orders, Ross brings Wisehammer, Caesar, and Liz to the second rehearsal. Nobody feels comfortable rehearsing in Ross's presence and Ralph tries to get him to leave. This just infuriates Ross. He starts humiliating the convicts, forcing Sideway to show his flogging scars, Dabby to imitate a dog and Mary to show the tattoo high up on her inner thigh. As the rehearsal continues, Sideway and Liz begin to enter more fully into their parts, boldly using the full length of the room and interacting with the others. The words of the play take a double meaning highly significant to the situation. In response, Ross orders Campbell to flog Arscott as punishment for his escape; the sounds of the flogging and Arscott's cries end the rehearsal.
Liz has been sentenced to death for stealing food. Freeman reluctantly measures her for hanging. Harry, who oversees the process, still hears the ghosts of the dead. It becomes clear that Liz did not defend herself at her trial, but just as 'Ketch' and Harry are about to leave, she asks Harry to tell Ralph that she did not steal the food. As they question her as to why she didn't speak up, Harry collapses.
As Cable is not back, Ralph has taken over his part in The Recruiting Officer. It is clear by now that Wisehammer and Ralph are rivals for Mary’s affection, just as they are for Silvia’s in the Farquhar play. Dabby complains that she can't relate to her character, but Wisehammer argues that a play should teach you something new. Arscott remarks that the play allows him to forget about own situation, contrasting with Dabby, who wants to play herself. The arrival of Ketch Freeman ends the rehearsal, as the others refuse to act with a hangman.
In Harry Brewer’s tent, Duckling promises love and fidelity to Harry, only to discover that he has just died. She collapses.
Mary is rehearsing on her own. Ralph joins her. Reciting their lines in the play, they end up confessing their love.
Philip, Ross, Collins, Campbell and Ralph discuss Liz Morden one more time. Philip is afraid of a miscarriage of justice, as the evidence against her is flimsy. Liz is given a last chance to defend herself. She finally speaks, saying that she knew Cable wanted to steal the food, but she wasn’t present when he did. Collins orders a retrial. Despite her situation, Liz surprises everyone present by politely promising to perform her role in the play.
Backstage before the performance, the actors attempt to console Duckling. They also discuss the future: Dabby plans to escape that night; Sideway wants to start a theatre company; Liz and Freeman want to join Sideway's company as actors and Wisehammer as playwright; Mary and Ralph plan their lives together. Caesar is very drunk and suffering from stage fright; only ludicrous threats from his fellow actors convince him to go on stage. Wisehammer reminds Ralph of the prologue he wrote for the play and reads it. Although pleased, Ralph does not dare to use it, because it is too political. The play begins: Arscott and Caesar go onstage while as the rest of the cast listens in trepidation. The first speech of the play is met with tremendous applause.