Storyteller 1, Storyteller 2, and Storyteller 3 emerge to tell a fairy tale, which begins with Mama Ogre and Papa Ogre telling seven-year-old Young Shrek that it’s time to leave the house and grow up. Shrek leaves his parents and makes his new home in a swamp. He cuts off society and decides that his own company is all he needs (“Big Bright Beautiful World”).

Shrek’s isolation is interrupted when the Captain of the Guards brings on the Fairy-Tale Creatures, including Pinocchio, Big Bad Wolf, Pig #1, Pig #2, Pig #3, Wicked Witch, the Three Bears, Peter Pan, Ugly Duckling, and Fairy Godmother, to dump them in the swamp; Lord Farquaad has banished them from the Kingdom of Duloc. The Fairy-Tale Creatures are lamenting their lives (“Story Of My Life”) when Shrek returns from an errand to find his swamp full of outcasts. Shrek decides to find Farquaad and demand he remove the creatures from his home.

Shrek is struggling to find Duloc when Donkey runs onstage, avoiding the Guards from Duloc. Shrek scares away the Guards, and Donkey pledges he will help Shrek find Duloc since Shrek saved Donkey’s life. Donkey and Shrek arrive at their destination, where they are greeted by the Duloc Performers (“What’s Up, Duloc?”). Performer introduces them to Lord Farquaad, who calls in Gingy for questioning about the whereabouts of Fiona, a princess Farquaad intends to marry. Gingy, scared of Farquaad’s threats, reveals Fiona’s location. Farquaad shares his plan to find Fiona and make her his bride, thus making him a king. Farquaad calls in the Dulocians for the raffle drawing of who will be tasked with rescuing Fiona from her dragon-guarded tower.

Right as Farquaad is about to announce a name, Shrek and Donkey arrive. Shrek insists Farquaad remove the Fairy-Tale Creatures from his swamp, and Farquaad guarantees he’ll meet Shrek’s demand once Shrek brings Fiona to Farquaad. Shrek agrees, and a Guard hands him a file of all the information he’ll need to accomplish his task.

Meanwhile, in the dragon-guarded tower, Young Fiona, Teen Fiona, and Fiona sing about the day they’ve been dreaming of: being rescued by a prince (“I Know It’s Today”). Shrek and Donkey approach the tower and smell the Dragon. Shrek puts on a helmet he finds and charges forward. Donkey decides to wait for Shrek, but after hearing the Dragon’s roar, Donkey changes his mind about being alone and runs to find his ogre friend. When she realizes the day has arrived, Fiona panics, running to prepare herself for rescue, and poses in bed, pretending to be asleep. Shrek finishes climbing the tower and shakes Fiona awake. Fiona is upset by her broken expectations of rescue, but the Dragon’s roar interrupts the moment. Fiona, Shrek, and Donkey flee into the woods.

Fiona celebrates Shrek’s victory and asks if Shrek will take off his helmet so that the two can share in “true love’s first kiss.” Shrek finally reveals his face, and Fiona is shocked and disappointed: she admits she expected someone different. Shrek reminds Fiona she’ll meet the real person responsible for her rescue the next day, and jokes about Farquaad’s small stature, which irritates Fiona. Before their conversation gets too heated, Shrek passes gas, causing Fiona to smile. Fiona burps in response, and the two carry on in a call-and-response fashion. They laugh and smile at each other, and Donkey notices the romance between them (“Make A Move”). Fiona realizes it’s sunset and flees into a barn to sleep.

The Storytellers then share Fiona’s secret: A curse was placed on her that turns her into something different at night. This curse will only be broken when she experiences true love’s kiss, at which time she will take her true form.

Donkey confronts Shrek about Shrek’s feelings for Fiona, and Shrek insists a princess could never love an ogre. Donkey, frustrated, leaves for firewood. When Donkey returns to find Shrek gone, he checks the barn and runs into Fiona in her cursed state: an ogress. Fiona explains the history of her curse to Donkey, who realizes that Shrek and Fiona are truly the perfect match. Shrek brings Fiona a sunflower at the very moment Fiona expresses that she is desperate for her true love’s kiss, believing herself unlovable as someone who is “ugly.” Shrek, overhearing this conversation from outside the barn, mistakes the person she’s talking about to be himself and is deeply hurt. He believes his fate is clear and leaves the sunflower, hopeless to be with Fiona.

As the Rooster crows the next morning, Fiona emerges from the barn, finds the sunflower, and sings about pondering true love (“The Next Morning”). Shrek approaches, and Fiona is just about to confess her feelings for Shrek when he loses his temper about the hurtful things Fiona said the night before. Fiona mistakenly thinks he’s confirming that he could never love her because of the way she looks as an ogre. Believing that she has no future with Shrek, Fiona commands she and Farquaad be married that very day.

Donkey is prodding Shrek to go after Fiona when the Fairy-Tale Creatures trudge onstage, having been evicted from Shrek’s swamp. The Fairy-Tale Creatures encourage Shrek by telling him to be himself in the boldest of ways “(Freak Flag”). Shrek accepts himself for who he is and decides to go after the princess.

In Duloc, the Bishop is marrying Farquaad and Fiona when Shrek, Donkey, and the Fairy-Tale Creatures interrupt. Fiona, upset, rushes off, and the Fairy-Tale Creatures demand their homes back from Farquaad. When he refuses to meet their requirement, Pinocchio brings on Dwarf, Farquaad’s long-lost father. The Crowd is shocked that Farquaad is half-dwarf, and Farquaad throws a tantrum, insisting he’s a real king.

Fiona, interrupting Farquaad’s meltdown, returns in her ogress form. Farquaad threatens to lock Fiona away, but the Dragon enters and torches Farquaad, allowing the wedding to proceed. Shrek kisses Fiona, and she takes her true form: an ogre, just like her true love, Shrek. Everyone sings about how being special, and together, is what makes us strong (“Finale”).