Act One

The exterior of Wits End Palace. Emperor Maximilian the Most and Empress Carlotta the Least reign supreme over an almost bankrupt kingdom. We meet the remaining members of the Court: Chester the Jester, Sinister the Prime Minister, Lady Winifred of Wardrobe, Sir Ivan of Inventory and the Royal Herald ("Welcome to the Palace"). The exterior of the Palace opens to reveal the Throne Room. After hearing his Court list his thousand upon thousands of pieces of clothing, the Emperor decides that he has NOTHING to wear to the Royal Procession that is honoring his missing son. He needs new clothes immediately! The Empress enters tooting a horn and explains that the kingdom is out of cash – in fact, things are so bad that she has to play her own fanfare ("Blow Your Own Trumpet"). If that weren't bad enough, they've also had to let the Royal Tailors go – no one is left to make the Emperor's new clothes! The Emperor sends for Sinister the Prime Minister, whom the Empress believes is embezzling money from the royal coffers. Sinister reassures the Emperor and says that he'll find new tailors – all he needs is for the Empress to sell some of her jewels to cover the bill. The Court joins Sinister in his new proclamation and gets the Emperor so excited about the prospect of something new that he cannot help but agree to Sinister's plan ("The Emperor Needs New Clothes").

The Crossroads near the Palace. Two strangers stand at the Crossroads at their wits' end. Where can they possibly go? They've been run out of Lands End, Dead End and Graves End... the only choice left is Wits End! The Royal Herald enters with Sinister's Proclamation: The Emperor needs new clothes... and new tailors! One stranger takes charge. Calling himself Mr. Stitch, he convinces his friend to call himself Mr. Sew. They decide to pull the wool over the eyes of everyone at the castle by pretending that they're tailors who make invisible clothes! ("Stitch and Sew;" "Knit One, Purl Two"). After they work out their routines, the two schemers head over to the Palace to try their luck.

Sinister meets Stitch and Sew at the Palace. They introduce themselves as world-famous tailors. Sinister and Lady Winifred aren't so sure, but Stitch explains that everyone "in the know" has heard of them... and that only people who are out of the loop haven't. Not wanting to seem uncouth, Sinister admits that he has heard of Stitch and Sew and agrees to introduce them at court.

The Throne Room. Chester enters singing "The Emperor Needs New Clothes" and is interrupted by Verity, a poor scullery maid from the Royal Kitchens. They become fast friends. Verity explains that her name means "The Truth" and reveals magic glasses given to her by her aunt before she died and left Verity an orphan. Chester reveals that he is also an orphan, but, when Verity looks at him through her magic glasses, she sees a prince! Verity explains that the glasses always show the truth, no matter what. Chester looks at Verity through the glasses and sees a princess. They laugh, thinking how nice it would be if that were really the case ("If I Could Be a Princess"). They are interrupted by the Royal Court. Verity hides behind the throne as Sinister enters and introduces Stitch and Sew to the Emperor ("Stitch and Sew – Reprise"). The Emperor is very interested in the kind of clothes that they make. Stitch reveals that they only make a very particular kind of clothing – clothing that can only be seen by the most wonderful, smart and savvy people... clothing that is invisible to fools and nothings. The Emperor is intrigued, but the Empress is suspicious. Still, with Sinister's prompting, they agree to hire Stitch and Sew and give them a long list of items to be made for the next day's Royal Procession that is honoring poor Lester the Lost ("The Emperor Needs New Clothes – Reprise"). Unafraid, the tailors accept the Emperor's challenge, and the Court exits, leaving Chester and Verity alone once more. Verity doesn't believe one word that the tailors have said and suggests that, the next morning, they use her magic glasses to see if the invisible clothes are real. Not wanting to part, Chester and Verity wish that they were really royalty and that they could be together ("If I Could Be a Princess – Reprise").

Tailor Quarters / The Palace Exterior. Stitch and Sew have the candles blazing, pretending that they're awake and making the Emperor's new "clothes." The members of the court are curious and, one by one, Lady Winifred, Sinister, the Emperor and the Empress enter, trying to get a glimpse of what the tailors are doing ("Making Invisible Clothes"). Chester enters and stretches out to sleep as the Court exits into the wings.

Act Two

The Next Morning. Palace Exterior. Chester and the Court greet the day with anticipation. Everyone is brimming with excitement ("Welcome to the Palace – Reprise"). The Emperor and Empress arrive and ask how Stitch and Sew are doing, but no one seems to know. The whole kingdom is buzzing with the news that the Emperor will soon have new invisible clothing. The members of the Court are anxious that they won't be able to see the new clothing, proving that they are dimwitted, but everyone is determined to put on a brave face. No one wants to be suspected of being dimwitted, but the Empress admits that she's a bit worried. She asks the Emperor if invisible clothing is really such a good idea – won't some people see nothing at all? ("What Good Are Invisible Clothes?"). The Emperor sends Sinister, Lady Winifred and Sir Ivan to check on Stitch and Sew. He wants to know if they are able to see the clothing.

The Tailor Quarters. Stitch and Sew are relaxing. Even though they're tired from a long night of pretending to work, they can't help but dream about all of the jewels they'll have when the Emperor pays them. Stitch assures Sew that everyone in the kingdom will pretend that they can see the invisible clothes to avoid looking like imbeciles. The plan is fool proof. There is a knock on the door. Stitch and Sew get back to "work," snipping and sewing the air with their scissors and thread. Sinister enters with Lady Winifred and Sir Ivan. Sure enough, even though they can't see the clothing, everyone pretends as though they can to avoid looking foolish. No one wants to admit that they're dimwitted! They gush over the beauty of the cloth and the quality of the designs. When they leave, Stitch and Sew are thrilled! Their plan is going to work ("Stitch and Sew – Reprise").

Hallway of the Palace. Sinister, Lady Winifred and Sir Ivan assure the Emperor and Empress that the invisible clothes are exquisite, but the Empress is not convinced. She decides to go have a look herself, threatening to fire Sinister and his cronies if she doesn't see anything.

The Tailor Quarters. The Empress enters as Stitch and Sew jump back to "work." The Empress doesn't see anything, but with a little trickery and persuasion, Stitch and Sew quickly convince the Empress that the invisible clothing is real. Soon, she pretends that she can see it, too, and even "holds" an invisible handkerchief, using it to clean her glasses. Stitch and Sew put on a show to impress the Empress ("Knit One – Reprise"). The Empress realizes that, even though she can't see a thing, she'll have to pretend that she can or else Sinister will say that she's unfit to be the Empress. Stitch and Sew offer to show the Empress everything that they've made ("Behold the Robe"). By the end of the song, the Empress is playing along but admits to the audience that she thinks she's going crazy. On her way out, Stitch reminds the Empress to bring the royal jewels, or the Emperor won't get a thing. She agrees.

Palace Gardens. Verity and Chester meet and prepare the magical truth-seeing glasses. Testing them, they each take a peek through the glasses at one another. Chester still sees Verity as a princess, and Verity still sees Chester as a prince. They wonder why they keep seeing those images. Chester suggests that maybe they're just wishing them into existence, but Verity insists that her aunt told her that they only show what's real ("Look through the Glasses"). They dance together until they are interrupted by a fanfare announcing that the Emperor is ready to try his new clothes. Chester borrows the glasses and tells Verity to hide behind the throne during the Royal Procession – he has a plan!

The Tailor Quarters. The Royal Court assembles at the Royal Tailor Quarters. The Emperor enters with the Empress, who carries a small bag of jewels. The Emperor asks Stitch and Sew where the clothes, are and they show him an empty rack... "brimming" with invisible clothes. The Empress and the Court assure the Emperor that the clothes are there. Against his better judgment, the Emperor quickly agrees that he can see them, too – he doesn't want anyone to think he's unfit to be in charge! Stitch and Sew ask the Emperor to follow them to the fitting room. Over the screen, Stitch asks the Empress for the jewels, which she hands over. Everyone is excited to see how the Emperor looks in his new outfit. Piece by piece, Sew hands Stitch "items" from the clothing rack. With each new piece, the Court oohs and ahhs, each outdoing his neighbor by describing what he can see. In reality, each member of the Court is horrified that they can't see anything! Still, no one is brave enough to tell the truth ("Behold the Robe – Reprise"). The Emperor enters, wearing nothing but bright red long underwear. Everyone gasps but quickly jumps in, saying that the Emperor looks splendid in his new clothes ("New Clothes – Reprise"). Chester looks at the Emperor through Verity's magic glasses and realizes that Stitch and Sew have just played a hoax on the entire kingdom – there are no clothes at all. Chester decides to wait to see what happens during the Royal Procession. Before the Emperor leads the Court in the Royal Procession, Stitch and Sew try to leave, but the Emperor insists that they join him. They are trapped! The Procession begins with Stitch and Sew, "holding" the Emperor's cape behind him. The Emperor and his Court march through the audience. Chester accompanies the procession and asks audience members (especially the children) if they can see the Emperor's clothes, encouraging them to say "no." The Emperor is horrified and insists that the Procession return to the Palace at once. Verity hides behind the throne before the Royal Procession returns to the stage.

The Throne Room. The Emperor is terribly embarrassed that the children in the audience couldn't see his clothes, but Sinister assures him that the children were lying. Chester steps in and says that the children were telling the truth – there ARE no new clothes! Stitch and Sew accuse Chester of not being able to do his job, but Chester gives the Emperor the magic truth-seeing glasses. He looks through them and sees himself in the mirror... in nothing but his underwear! Stitch and Sew are revealed as imposters. Verity steps from behind the throne, and Chester introduces her as the owner of the magic glasses. The Empress and Emperor look through the glasses again and see Sinister as he really is – a pilferer who wants the throne for himself. They accuse him of kidnapping their son, Lester. Sinister admits that he knows where the prince is but will never tell. Verity says that she thinks that she knows where to find the missing prince and encourages the Emperor and Empress to look through the glasses once more, this time at Chester. To their surprise, they find that Chester is really their son – Lester the Lost has been found! Sinister is banished from the kingdom. The Emperor lets Stitch and Sew go, and the Empress even lets them keep the Royal Jewels. When Stitch looks inside the bag, however, he finds that the Empress has given them "invisible" jewels. The swindlers are swindled! Chester/Lester takes his rightful place as Prince, choosing Verity to be his Princess. The Emperor announces that there will be a Royal Wedding the next day... and that he needs new clothes for the occasion. Everyone joins in the celebration ("Act Two Finale").