It is the summer of 1963, and the Houseman family are vacationing at an upscale resort in the Catskills, named Kellermans. Jake Houseman is a friend of the resort's owner, Max. The Houseman sisters, Frances, who goes by the name of Baby, and Lisa, are both fascinated by the resort's dancers. Baby in particular enjoys watching them practice and meets Penny, a former Rockette girl, who is now the mambo teacher at the resort.
Baby is anxious to get out on her own and explores the resort at night. She sees that Max treats the summer staff, who are all Ivy League students, very differently from the working class staff, like the dance instructors. The students are told to romance the guests' daughters even if they are not attractive; Max is particularly demeaning to Johnny Castle, whom Baby has a secret crush on. She goes to one of the staff's secret parties one evening with Billy, who is Johnny's cousin.
Penny and Johnny are dance partners, but not dating. Penny has had a brief flirtation with Yale student Robbie, a waiter who is a compulsive womanizer, and a player, and she is now pregnant with his child. Robbie refuses to take responsibility for the pregnancy and won't have anything more to do with Penny, so on an impulse Baby borrows a thousand dollars from her father, with no explanation as to what it is for, and she gives it to Penny so that she can have an abortion. At first Penny is reluctant to take her money and she is also worried that she and Johnny will miss giving a performance at a neighboring resort, which will mean that they both lose money, but Baby offers to stand in for her and dance with Johnny.
There is a natural chemistry between Baby and Johnny at their practices. Baby is a good dancer but she is afraid of falling during their lifts. They practice the lifts in a nearby lake to break her fall if the lift goes wrong. At the performance, Baby does well but still misses the lift, although Johnny reassures her that she did a good job. They are falling in love and finally admit their feelings to each other.
Penny becomes very sick because the abortion was not done properly. Baby asks her father to help and make sure that she is stable. He does, but he assumes that it was Johnny who got Penny pregnant and he forbids Baby to see him anymore. Later, she sees Johnny in secret and tells him she is sorry that her father was so rude to him, but Johnny thinks that he deserves to be spoken to that way because her father is a doctor and he is just a dancer. They continue to see each other because they are in love. Jake is still ignoring Baby because she was not honest with him about why she needed the loan.
Meanwhile, Lisa conspires to lose her virginity to Robbie but he is sleeping with Vivian Pressman, the wife of a resort guest who has been making a play for Johnny, who makes it plain that he is not interested. When Vivian sees Baby leaving Johnny's cabin she is furious, and she alleges that he stole her husband's wallet to get back at him. As Max is about to fire Johnny, Baby confirms his alibi and admits that during the time of the theft they were together. Johnny is fired anyway and told to stay away from the town. He tries to talk to Jake before he leaves but Jake won't listen to him. Baby apologizes to Jake for lying by omission, but she refuses to apologize for loving Johnny and tells Jake that the only reason he doesn't like Johnny is that he is working class.
The end of summer is marked by the end of season dance at the resort. Jake chats with Robbie and gives him money towards medical school, but Robbie is cocky and carelessly lets slip that he got Penny pregnant, insulting both her and Baby in the process. Jake is angry and grabs the money back, reporting Robbie to Max, who fires him.
Johnny has not left the resort yet, and arrives as the final song is beginning. He drags Baby up onto the stage and announces that he is in love with her. They dance, just as they practiced, but this time, Baby is confident and they manage to perform the final lift that she was too scared to attempt in public before. Jake reluctantly admits that he was wrong about Johnny and reconciles with both Johnny and Baby, as the room erupts into dancing, with Johnny and Baby in the center of the dance floor.
