At revivals that use the 1978 song "Grease", it is typically inserted at or near the beginning of the show.

At the Rydell High Class of 1959 reunion ("Alma Mater"), old maid English teacher Miss Lynch introduces former cheerleader/yearbook-editor Patty Simcox Honeywell and class valedictorian Eugene Florczyk. Eugene gives a rousing speech, mentioning that the alumni who are missing from the reunion are surely present in spirit. The scene segues to bring in the greaser gang known as the Burger Palace Boys (known in later versions as the "T-Birds") and their auxiliary, the "Pink Ladies", as they sing a cruder version of the Rydell alma mater ("Alma Mater (Parody)").

Flashing back to the first day of high school in fall 1958, the Pink Ladies sit in the lunchroom, and the Burger Palace Boys sit at the entrance to the school. One of the Pink Ladies, Frenchy, introduces her new neighbor Sandy Dumbrowski, who had been unjustly rejected from a Catholic school, to the others (Marty, Jan and Rizzo), as well as Patty. Sandy tells of how she had a brief love affair the summer before, which ended with unresolved love. Meanwhile, womanizing greaser Danny Zuko is telling the Burger Palace Boys (Kenickie, Roger, Doody and Sonny) the story of his own summer fling ("Summer Nights"). The Pink Ladies soon after realize that Sandy's summer fling was the same Danny Zuko that attends Rydell High and arrange for the two to bump into each other at school; the resulting meeting is tense and awkward, as Danny had previously told Sandy that he attended Lake Forest Academy and does not want to admit to the Burger Palace Boys that she was the woman he was talking about. As the Burger Palace Boys leave, Sandy is hurt and angry, but the Pink Ladies cheer her up, by inviting her over to Marty's pajama party.

Shortly afterwards, the teenagers gather in the hall as Doody shows off his new guitar and performs a song ("Those Magic Changes").

At Marty's pajama party, the girls experiment with wine, cigarettes, pierce their ears and talk about boys. The sheltered Sandy goes into shock and falls ill from seeing blood when the Pink Ladies try to pierce her ears, leading them to mock her when she's not in the room (in some revivals, the song "Look at Me, I'm Sandra Dee" is placed here, mirroring the film). Marty tells about her long-distance courtship with a Marine named Freddy and it is implied that she maintains it only because of the lavish gifts he sends her from Japan ("Freddy, My Love").

That same night, the Burger Palace Boys are busy stealing hubcaps, unaware that the hubcaps are on Kenickie's car, Greased Lightnin'. Unfazed by the others' skepticism, Kenickie sings of the upgrades needed to make the car a racing-worthy chick magnet ("Greased Lightnin'").

Danny sees Sandy again at her cheerleader practice, and tries to apologize for his behavior. Patty interrupts and flirts with Danny. Patty informs Danny that track try-outs are nearing, and Danny tells Sandy that he will join the track team to prove himself; he leaves as Patty and Sandy practice cheering ("Rydell Fight Song").

As the Burger Palace Boys and Pink Ladies gather at the park, Danny reveals to the rest of the greasers that he has joined the track team, much to their dismay and skepticism. After Roger and Jan bicker about food, drink, and religion, Jan asks him how he earned the nickname Rump; he explains that, as "King of the Mooners", he has a hobby of baring his backside to unsuspecting victims, and in the process, both reveal their affections for each other ("Mooning"). Rizzo teases Danny for falling for a girl who resembles the excessively proper teenage ingénue, Sandra Dee, and the other greasers join in as she makes fun of Sandy, who has not arrived at the picnic yet ("Look at Me, I'm Sandra Dee").

Sandy, working on a biology assignment with Eugene, comes in just as the greasers finish making fun of her. She attacks Rizzo in a fit of rage and erroneously assumes Danny is the one behind the mockery. Furious, she tells Danny that she wishes she never met him and storms out of the picnic. Danny shrugs off Sandy's negative response, and the greasers pair off for the upcoming sock hop. Danny teases Marty for not having a date (recommending Eugene), and the greasers all laugh ("We Go Together").

For revivals that use "Hopelessly Devoted to You", the exact placement varies. It sometimes replaces the first rendition of "We Go Together" and in other examples, such as the 2007 revival, it is placed early in Act II.

The night of the sock hop arrives ("Shakin' At the High School Hop"). Sandy is at home by herself, listening to the radio and crying over how much she misses Danny ("It's Raining on Prom Night").

Meanwhile, Kenickie comes into the dance with his date, Cha-Cha DiGregorio, a girl from Saint Bernadette's Academy. Patty tries to pair up with Danny, trash-talking Sandy's cheerleading skills in the process, but is unable to get out of her promise to dance with Eugene despite Rizzo trying to seduce Eugene as a distraction. Kenickie ends up paired off with Rizzo, and Danny with Cha-Cha. The MC Vince Fontaine, a radio disc jockey, begins the hand jive dance contest, and everyone eagerly participates as he tags the contestants out ("Born to Hand Jive"). In the end, Danny and Cha-Cha are the winners. Amongst the awards given to the couple, Danny receives two free drive-in movie tickets.

Sometime later outside of the Burger Palace hangout, Kenickie, Doody, and Sonny run into Frenchy. The boys are armed with an "arsenal" of household items and reveal that, to their surprise, Cha-Cha was the girlfriend of someone in the boys' rival gang, the Flaming Dukes; the Dukes, hearing of Cha-Cha's dancing with the Burger Palace Boys, challenged the boys to a rumble. Danny sprints into the scene wearing his track suit, to the disbelief of the other boys. Danny tells the boys he cannot partake in the rumble because of a track meet and sprints off.

The three remaining boys go into the Burger Palace for a snack before the fight, and Frenchy laments at what to do with her life, having dropped out of beauty school in frustration at failing all of her classes. The heavenly Teen Angel appears with a chorus of back-up singing angels and tells her to return to high school ("Beauty School Dropout").

The three boys exit the Burger Palace, bemoaning Danny's betrayal while only halfheartedly noticing Roger is unaccounted for. They wait for the Flaming Dukes, but the rival gang never turns up. Roger finally turns up with only a broken antenna as a weapon; in response, the other three proceed to strip Roger of his pants and shoes.

At the drive-in, Danny tries to make up for his behavior and offers Sandy his class ring. She initially is thrilled, but pulls back and exits the car when he tries to move beyond a kiss. Danny laments his loneliness ("Alone at a Drive-In Movie" or "Sandy").

Several days later, Sandy and the greasers — without Danny — are gathered in Jan's basement ("Rock 'N' Roll Party Queen"). Rizzo, who missed her period, fears she is pregnant and tells Marty (who herself laments that Vince tried to spike her drink at the dance) that the father is a stranger who had sex with her with a cheap, broken condom; word gets back to everyone else. The boys offer support as they leave; Rizzo rejects it, leading Sandy to ask her why and presume that Kenickie is the father. Rizzo responds by saying that she is a better person than others make her out to be and that showing weakness is the worst thing she knows ("There Are Worse Things I Could Do"). Rizzo leaves, and Sandy decides what she needs to do to fit in with the greasers ("Look at Me, I'm Sandra Dee" (Reprise)).

The next day, the boys are hanging out at the Burger Palace. A dejected Patty reveals Danny, who follows her in, has reverted to his old ways and quit the track team. Sandy comes in alongside the Pink Ladies, having transformed herself from an innocent schoolgirl into a greaser's fantasy, punching out a dismayed Patty. Danny is delighted at this change and the couple express their mutual feelings for each other ("All Choked Up" or "You're the One That I Want").

Afterwards, the greasers prepare to head to Roger's to watch The Mickey Mouse Club, inviting Patty along. Frenchy takes a job as a makeup saleswoman at Woolworth's, Rizzo reveals that she is not pregnant, and she and Kenickie reunite. All ends happily, and the Burger Palace Boys, the Pink Ladies, Sandy, and Patty sing about how they will always be friends to the end ("We Go Together" (Reprise)).