In 1927, cornet player Pete Kelly is the leader of "Pete Kelly and his Big Seven Band" which performs nightly at a seedy Kansas City, Missouri speakeasy. Rudy, the parsimonious manager who serves watered-down whiskey, treats the musicians well and the jazzmen are reasonably content with their lot, until racketeer Fran McCarg decides to take over the local bands and extort them for twenty-five percent of their earnings. Pete discusses McCarg's demands with his band, who decide as a group to refuse to cooperate with the mobster. Joey Firestone, the band's young drummer, who has never experienced the brutality of men like McCarg, is especially vocal in his indignation. Pete's closest friend, clarinetist and band member Al Gannaway, predicts that McCarg will kill one of them. Before Pete can talk to McCarg, Rudy sends the band to play at a private party held by flapper Ivy Conrad, who is the daughter of a prominent family. Infatuated with Pete, the fashionable Ivy throws herself at him, but he is not impressed by her forced conviviality. Although Pete is distracted by thoughts of McCarg, he agrees to dance with her, but when she grabs his horn to get his attention, he lets her fall into the swimming pool. Meanwhile, McCarg phones the mansion to talk to Pete, but a drunken Joey takes the call and rashly tells him off. Later, while driving home, the band is run off the road by McCarg's men and Joey is thrown through the windshield. He quickly recovers, but Pete and Al realize that McCarg will continue to harass them until they give in. Tired of mobster politics, Al soon leaves the band. When Pete learns that Joey has had a fight with Guy Bettenhauser, one of McCarg's men, Pete tries to try to reach McCarg in time to smooth over the incident. McCarg bursts into the speakeasy around two in the morning and Pete takes the hotheaded Joey out the back exit, but a battery of gunshots from a car at the alley entrance strikes Joey dead. McCarg claims to be innocent and names Bettenhauser as the killer. Later, in the room he shares with a pet bird, Pete finds Ivy sleeping in his bed. He tries to send her home, but she refuses and he soon succumbs to her amorous agenda. In response to McCarg's demands, band leaders meet secretly at a roadhouse to discuss pooling their money to buy protection. Reminding them of previous failed attempts to dissuade racketeers, Pete announces that he plans to pay McCarg. After being warned by singer Maggie Jackson that a policeman is looking for him, Pete is waylaid by detective George Tenell. The tough cop wants Pete's help in building a case against McCarg, but Pete refuses. Back at the speakeasy, where the band is breaking in Joey and Al's replacements, Pete tells McCarg they "have a deal" and McCarg introduces singer Rose Hopkins, whom he wants to feature in Pete's act. Despite the difference between the band's brisk musical style and Rose's slow, bluesy singing, McCarg forces them to perform together. McCarg wants to make her a star, but the aging Rose has lost her ambition and drinks heavily whenever McCarg is not around. At a ballroom owned by McCarg in which the band has been ordered to play, Ivy proposes to Pete, and overcomes his doubts about a marriage between a spoiled rich girl and a "tramp musician." One night, when the drunken Rose is ignored by a rowdy crowd, she breaks down in the middle of the song. McCarg beats her up, as his thugs prevent Pete from rescuing her. Later that week, Pete encounters Al, who is touring with a big band and, after accusing Pete of selling out, demands that Pete return a cornet mouthpiece of sentimental value that Al gave Pete long ago. Later that night, however, they make amends and Al decides to stay in town. After deciding to assist Tenell, Pete learns that Rose suffered head injuries and has been admitted to a state asylum. In a confrontation with McCarg, Pete accuses the racketeer of Joey's murder and tries to quit, but when McCarg makes death threats, Pete backs off. Without explaining his reasons, Pete postpones his marriage to Ivy, who then breaks up with him. Because he and Tenell think they can get to McCarg through Bettenhauser, who is missing, Pete visits Rose at the asylum. Although she is functioning at the level of a five-year-old, she is able to tell him that Bettenhauser is hiding out in Coffeeville, Kansas. Tenell wires the Coffeeville police, and as they wait for a response, Bettenhauser has Maggie summon Pete to the roadhouse. There, Bettenhauser tells Pete that McCarg ordered Joey's death. For $1,200, the sum he needs to leave town, Bettenhauser offers to provide documents and cancelled checks that will prove McCarg's guilt. After Pete agrees to the deal, Bettenhauser tells him the documents are stored in the ballroom office, which is closed that night. When Al hears that Pete is preparing to break into the ballroom, he offers to help, prompting Pete to knock him out to keep him out of harm's way. On his way to the ballroom, Ivy stops him and asks to make up, but in his haste, Pete rebuffs her. She follows him to the ballroom, turns on the player piano and drunkenly demands to dance. While Pete tries to appease her, McCarg, Bettenhauser and another thug enter and surround them. Pete and Ivy take cover behind tables as a shoot-out commences. When Bettenhauser climbs to the scaffolding above the mirror ball, Pete shoots him, sending him crashing to the floor. As the remaining henchman takes aim, Pete throws a chair, causing him to misfire and kill McCarg. The thug, claiming that he has "nothing to gain" by continuing the fight, leaves the ballroom without harming Pete and Ivy. Later, Ivy and Pete are married, and Pete and the Big Seven are playing together again at Rudy's.
