At an early twentieth-century train station, Anne Shirley, a skinny twelve-year-old, anxiously waits with her baggage, trying to keep up her spirits ("Around the Bend"). Unseen by her, Matthew Cuthbert arrives and converses with the Station Master. When the Station Master tells Matthew that the girl he was expecting has arrived, Matthew protests that he was actually expecting a young orphan boy to help him on his farm, Green Gables. Anne greets Matthew with enthusiasm, however, and he shyly takes her along.

Meanwhile, Matthew's sister, Marilla, is being visited at Green Gables by a nosy neighbor, Rachel Lynde. Rachel warns Marilla that adopting orphans is a risky undertaking.

As Mathew and Anne approach Green Gables, she grows increasingly excited. Matthew explains the mix-up to Marilla – the orphanage has sent them a girl instead of a boy. Upon hearing this, Anne bursts into tears. Marilla consoles her ("A Pretty Kettle of Fish"). Matthew has taken an instant liking to Anne, but Marilla is determined to send her back.

Marilla and Anne ride into town to sort out the mistake but, on the way, Marilla begins to warm to Anne. In the end, it's determined that an attempt will be made to find Anne a home with another local family so that she won't have to go back to the asylum.

That night, Anne shares her history with Marilla: both of her parents died when she was three years old and she passed through a succession of foster families until she was recently sent to the asylum. Her formal education has been limited, but she is an avid reader.

Marilla tells Matthew that Anne can stay with them on a trial basis. Anne overhears this and is delighted ("I Can Stay").

A few days later, Rachel visits for tea and, again, warns of the danger of adoption. Marissa introduces Anne to Rachel. Rachel immediately insults Anne's appearance rudely. Anne is stunned and exclaims that she hates Rachel. Marilla reproaches Rachel and punishes Anne.

Rachel spreads vile rumors around town about Anne ("It's the Strangest Thing").

Anne remains confined to her room until she agrees to apologize to Rachel, which Matthew convinces her to do. Anne does ask Rachel for forgiveness, and Rachel accepts the apology. Anne feels that this act has pleased Marilla ("Kindred Spirits").

As Anne and Matthew are celebrating, a young neighbor, Gilbert Blythe, arrives. He is a self-assured charmer. Gilbert's first meeting with Anne does not go well, as he unintentionally upsets her with his teasing. After Gilbert departs, Matthew assures Anne that the boy meant no harm. Matthew explains that Gilbert's father once courted Marilla.

Not long after, Marissa is preparing to take Anne over to the home of the Barry family, which includes Diana, a girl Anne's age, whom she hopes to befriend. Anne and Diana do indeed hit it off, and Anne asks Diana to vow to be her "bosom friend" ("Making up for Lost Time").

Not long thereafter, the two girls are on their way to school in a downpour and encounter Gilbert, their fellow classmate. Diane accompanies Gilbert, who has an umbrella, but Anne refuses to do the same. As a result, she arrives late (and wet) for class. The teacher, Mr. Phillips, begins class with a lesson on punctuation ("The Use of the Colon"). Gilbert flirts with Anne during the lesson, but she rebuffs him. After class, he again tries to approach her, but she reacts badly to his teasing advances ("Two Weeks").

Marilla is preparing to depart the house for a meeting while Diana is coming to visit Anne. Marilla tells Anne that the girls can have tea and gives her some raspberry cordial (unbeknownst to any of them, it is alcoholic). Unfortunately, because Gilbert had teased Anne about her red hair, she has accidentally dyed it green in an attempt to turn it black. As Marilla departs, Diana arrives and is shocked at Anne's green hair. The two girls enjoy some raspberry cordial and Diana loosens up in short order. She suggests that Gilbert is indeed the reason that Anne tried to dye her hair, but Anne vehemently denies this ("It Was Not Because of Gilbert Blythe"). Diana feels sick as she gets increasingly more drunk.

Later, Rachel accosts Marilla in the kitchen, reporting the claim of Diana's mother that Anne got Diana drunk ("Drunk!"). Anne denies this. Marilla realizes that she gave Anne the wrong cordial. Diana's mother decrees that the girls will no longer see each other. Marilla charges to Anne's defense but is unable to persuade Diana's mother of Anne's innocence.

Six months later, Anne has managed to regrow about three inches of hair after having her green locks sheared. She misses her friend, Diana, and Matthew consoles her. Suddenly, Diana arrives, explaining that her baby sister, Minnie May, is very sick with the croup and she doesn't know what to do. Matthew leaves to fetch the doctor.

Anne is experienced with treating the croup, so the girls hurry over to Diana's house and begin to treat the baby ("The Clock Keeps Ticking"). Matthew and the Doctor arrive, and the Doctor announces that the baby will be saved... thanks to Anne's help.

On her way home that night, Anne falls and injures herself. Fortunately, though, having heard of Anne's heroism, Gilbert arrives and helps her to get home.

Rachel is gossiping about Anne around town again but, this time, she's claiming that she always knew Anne was something special and she can't understand why nobody else recognized Anne's good character. Diana's mother apologizes to Anne.

Anne graduates from school, tied with Gilbert at the top of their class. Anne is accepted at the Teacher's Academy, and Matthew and Marilla proudly present her with a beautiful dress. A private conversation between Matthew and Marilla reveals that Marilla is concealing an illness from Anne, not wanting anything to distract Anne from her studies. Anne departs for the Academy.

Diana is unable to join Anne at the Academy, but Gilbert and several of their other classmates are there, including the vapid Josie Pye, whom Anne loathes. Gilbert and Anne are comforted by each other's presence at the school ("It's Nice to Know").

On graduation day from the Academy, it is announced that both Gilbert and Anne have won academic awards, and that Anne has won a four-year scholarship to Redmond College. When Anne returns home for the summer, Marilla reveals that she and Gilbert's father were once sweethearts, but that the relationship ended badly after an argument. Anne regrets being so stubborn in her attitude towards Gilbert. Matthew suffers a heart attack and collapses, dying. Anne tells him that, if only he had gotten the boy from the orphanage that he had wanted, he wouldn't have overworked himself. Matthew tells Anne that he couldn't be more proud of her.

Gilbert replaces Mr. Phillips as the local schoolteacher. Marilla plans to sell Green Gables, but Anne offers to forego her scholarship and teach locally so that Marilla can keep the farm ("Around the Bend – Reprise"). Gilbert gives his teaching position to Anne. Anne apologizes to Gilbert for her past unkindness to him, and the two acknowledge one another as kindred spirits ("Making Up for Lost Time / Around the Bend – Reprise"). They kiss at the train station as Gilbert departs to seek another teaching position in a neighboring community, promising to return for the weekend. The two look forward to spending the rest of their lives together.