American World War II veteran Jerry Mulligan lives in Paris trying to succeed as an artist. His friend and neighbor Adam Cook is a struggling concert pianist and longtime associate of French singer Henri Baurel. At the ground-floor bar in their building, Henri tells Adam about his girlfriend, Lise Bouvier. Jerry then joins them before going out to try and sell his art.

Lonely heiress Milo Roberts notices Jerry displaying his work in Montmartre. She buys two paintings, then brings Jerry to her apartment to pay him. Jerry accepts an invitation to her dinner party for that evening, and on the way home, he sings "I Got Rhythm" with some local children. Upon discovering he is Milo's sole dinner guest, an offended Jerry says he is uninterested in being a paid escort. Milo insists she only wants to support his career.

At a crowded bar, Milo offers to sponsor an art show for Jerry. Milo's friends show up and while everyone is talking, Jerry notices a beautiful young girl at the next table. He pretends they know each other and asks her to dance, unaware it is Lise, the girl Henri loves. When Jerry wants her phone number, Lise, uninterested, gives a fake one. Someone at her table misunderstands and says the correct number. Milo, upset that Jerry flirted with another girl in her presence, wants to leave and later criticizes him for being rude.

The next day, Jerry calls Lise, but she refuses to see him. Meanwhile, Milo has arranged a showing with a collector interested in Jerry's work. Before the meeting, Jerry goes to the parfumerie where Lise works. She agrees to a late dinner, but wants to avoid public places; they share a romantic song and dance along the banks of the Seine River. She then rushes off to meet Henri after his performance ("I'll Build a Stairway to Paradise"). Henri tells Lise he is going on tour in America and proposes marriage to her.

Later, Adam humorously daydreams he is performing Gershwin's Concerto in F for Piano and Orchestra in a concert hall. As the scene progresses, Adam is also the conductor, other musicians, and even an audience member enthusiastically applauding at the end.

Milo rents Jerry an art studio and says she is planning an exhibition of his work in three months time. Jerry initially refuses the studio, but accepts on condition he will repay Milo when his work sells. After a month of courting, Jerry brings Lise to his apartment building. When Lise suddenly rushes off in the waiting taxi, Jerry is confused and complains to Adam, who realizes that Henri and Jerry love the same girl. Henri and Jerry later discuss the girl they each love ("'S Wonderful") without realizing it is Lise.

That night, Jerry and Lise reunite by the Seine. Lise says she and Henri are to be married and going to America. Lise feels duty-bound to Henri for protecting her during the war. Jerry and Lise proclaim their love for each other before parting.

A dejected Jerry invites Milo to the art students' masked ball, where they run into Henri and Lise. Jerry admits to Milo that he loves Lise. When Henri overhears Jerry and Lise saying goodbye, he realizes the truth. As Henri and Lise drive away, Jerry fantasizes through a diverse and extended dance scene with Lise, all over Paris, and set to George Gershwin's An American in Paris. A car horn breaks Jerry's reverie; Henri returns Lise to him. They embrace and walk off together as the Gershwin composition (and the film) ends.