The story opens on V-J Day in 1945, the day World War II finally ended. A massive celebration in a New York City nightclub is underway, music provided by the Tommy Dorsey orchestra. While there Jimmy Doyle (Robert De Niro), a selfish and smooth-talking saxophone player, meets Francine Evans (Liza Minnelli), a small-time singer. Francine is lonely but still, she wants nothing to do with Jimmy, who keeps pestering her for her phone number.
The next morning, they end up sharing a cab, and, against her will, Francine accompanies Jimmy to an audition. There he gets into an argument with the club owner. Francine, to get the audition back on track, begins to sing the old standard, "You Brought a New Kind of Love to Me." Jimmy joins in on his sax. The club owner is impressed and, to Francine's astonishment, they are both offered a job—a boy-girl act.
From that moment on, Jimmy and Francine's relationship deepens into love. But there are problems—mainly, Jimmy's tendency to quarrel with everyone, and his increasingly violent fights with Francine, who becomes pregnant with his child. An especially bad shouting match between them results in Francine going into premature labor. Jimmy rushes her to the hospital, but he is not ready to be a father, or a good husband, and he abandons his wife.
Several years later, in a recording studio, Francine records "But the World Goes Round," a powerful anthem which makes the charts and turns her into a popular entertainment figure. In the following years, Jimmy and Francine both find success in the music industry. Doyle becomes a renowned jazz musician and club owner. Also, Francine becomes a successful singer and motion picture actress.
Jimmy records a song of his on his saxophone which tops the charts, and Francine cements her stardom after singing Jimmy's song, the Theme from New York, New York. Her performance, received by a wildly appreciative audience, takes place in the same nightclub where, years earlier, she and Jimmy had met. After the show, Jimmy telephones his ex-wife, proposing a reconciliation. Francine is tempted, heads toward the elevator, but at the last moment changes her mind. Jimmy, waiting on the sidewalk, realizes he has been stood up and walks off into the New York night, accompanied by the song he has written — the "Theme From New York, New York."