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In 1900 in Paris, Christian, a young writer depressed about the recent death of the woman he loved, begins writing their story on his typewriter.

A year earlier, he arrives in the Montmartre district of Paris to join the Bohemian movement. He suddenly meets Henri de Toulouse-Lautrec and his troupe of performers who are writing a play called Spectacular Spectacular. After Christian helps them complete the play, they go to the Moulin Rouge where they hope Christian’s talents will impress Satine, the star performer and courtesan, who will in turn convince Harold Zidler, the proprietor of the Moulin Rouge, to let Christian write the show. However, Zidler plans to have the wealthy, powerful and unscrupulous Duke of Monroth sleep with Satine in exchange for potential financing to convert the club into a theater.

That night, Satine mistakes Christian for the Duke and attempts to seduce him by dancing with him before retiring to her private chamber with him to discuss things privately, but eventually Christian reveals his true identity. After the Duke interrupts them, Satine claims that the two of them and the Bohemians were rehearsing Spectacular Spectacular. Aided by Zidler, Christian and the Bohemians improvise a story for the Duke about a beautiful Indian courtesan who falls in love with a poor sitar player she mistook for an evil maharaja. Approving the story, the Duke agrees to invest, but only if Satine and the Moulin Rouge are turned over to him. Later, Satine claims not to be in love with Christian, but he eventually wears down her resolve and they kiss.