Last Night at the Telegraph Club follows the story of Lily Hu from 1954 to 1955. Hu is a teenage girl living in Chinatown that had recently realized that she is a lesbian. She bonds with a white girl named Kathleen Miller, and the two talk about their interests in the cosmos and airplanes. Lily's friend, Shirley Lum, in love with Calvin, who assists in a Chinese cultural organization. Shirley, unaware that Lily is lesbian, tells her that she should date Calvin's brother. Kathleen discovers that Lily may not be straight when she sees that she had a picture of Tommy Andrews, which the novel describes as a "male impersonator".
Lily is shocked to learn that the FBI has taken away her father's citizenship, because he didn't admit that Calvin, who was his patient, was a communist. However, she continues to interact romantically with Kathleen and Kathleen suggests that the two could go to The Telegraph Club, where Tommy Andrews performs. Tensions rise when Shirley suggests that Lily stay away from Kathleen, who is friends with a queer person named Jean.
Later, Lily sneaks out at night to go to the Telegraph Club with Kathleen. She is overwhelmed seeing and talking to Tommy Andrews, and continues to think about the performance all night. Though she begins to feel more distanced from Shirley, the two agree to remain friends. Lily also discusses her interest in STEM with her Aunt Judy.
Kathleen again brings Lily to the Telegraph Club, and Lily is much more relaxed. Days after, Shirley discusses with Lily entering the Miss Chinatown Contest, and says she wants Lily to head the support committee because it could be one of the last things they do together. The commitment causes her to have less time to spend with Kathleen, and she worries their friendship is breaking down. Luckily, the two remain friends and go once again to the Telegraph Club, staying longer because they were invited to a party by Lana Jackson, Tommy's girlfriend. People there think that Lily and Kathleen are dating, and they both end up admitting their romantic attractions towards each other.
To make sure Shirley doesn't find out about this new, more official relationship, she continues to help her for the beauty pageant and only meets with Kathleen in secret. Lily goes to the Telegraph Club with Kathleen again one night, but it is raided by police and Kathleen is taken away.
Lily, unsure of Kathleen's whereabouts, contacts her family by phone. She spills everything about the girls' sexuality to Kathleen's mother, who rejects the notion and says that she did not raise a homosexual. Lily's parents also find out, and they say that she can't remain in school and must go live with Aunt Judy. She understands that they don't want her to see Kathleen any longer, but it feels freeing nonetheless to leave her old home.
The epilogue reveals that Kathleen and Lily are able to find each other once again about a year in the future. They still love each other, and are overjoyed by their love for one another.
