The company welcomes the audience and, in a narrative voice, introduces the story of Heidi ("Come Along"). In the opening song, the characters make the climb up a Swiss mountain to a small hut, high in the Alps. There, Heidi's unhappy grandfather sits all alone. Heidi's Aunt Dete has brought her to meet her grandfather, but the bitter old man has no interest in seeing either of them. It is revealed that, when Heidi's mother, Ilsa, married Dete's brother six years ago, Grandfather disowned her. He found his daughter too young for a marriage, but she married anyway and gave birth to a daughter, Heidi. Six years prior to this visit to the mountains, Heidi's parents died in an accident, and Dete has looked after her since. Now, Dete must move to Frankfurt to become a governess for a very important family, and they have no room for Heidi. Grandfather refuses to take the child, but, when Dete says that she must then place Heidi in an orphanage, the old man agrees to take her.

Left alone, Heidi and Grandfather helplessly stare at each other, neither knowing quite what to say. Heidi offers him a bunch of flowers; he offers her some bread and cheese, which she gobbles down quickly. Grandfather is a hermit who never sees or talks with anyone. Heidi promises to stay out of his way and she prepares for bed on some straw and a blanket. Grandfather goes outside to tend the goats, leaving Heidi alone to think about her new life, hoping that her dreams of happiness are not impossible ("Come Along – Reprise").

The next morning, Peter, Grandfather's goatherd, arrives and is shocked to meet Heidi. Grandfather insists that Peter take Heidi along with him while tending to the goats. Reluctantly, the boy agrees.

Up on the mountain with the goats, Peter is whistling away while Heidi is dragging along behind. The city where she used to live was flat and uninteresting, and the beauty of the mountains enchants her. The two children talk about Heidi's grandfather, and Peter tells her that the old man wasn't always the way he is now. Something in his past changed him, and whatever it was made him never want to leave his house again.

A yodel is then heard in the distance.Peter can't stand to yodel but he must to call his goats. Heidi, however, has never heard a yodel before and wants to learn to do it. She begs Peter to show her the right way, but he refuses. He only does it when he needs to do so. She pressures him, and finally he yodels for her. Soon, goats from all over appear while other animals begin to gather. A frightened Heidi then begs him to stop ("I Hate to Yodel").

Peter takes Heidi home, and they find Grandfather whittling on a stick. Once the boy leaves, Grandfather prepares to serve Heidi some dinner. She offers to help, but he doesn't want her assistance. Heidi sees a picture that she thinks is of herself, which is really of her mother as a girl. Heidi misses many things about her mother, especially the way that she sang her to sleep with a lullaby. She begins to sing, but Grandfather quickly hushes her; the sound of her voice is too painful for him. He then tells Heidi that she cannot stay with him any longer and that he will find a family to take her as soon as possible. She begs him not to send her away, but he can't deal with the pain of having her there. He hurries away, and Heidi is left alone. She looks at the sky and tries to sleep, but she hears her Grandfather outside, thinking about his daughter ("The Mountain Is Saying Goodnight").

The next day, while Peter and Heidi are out tending goats, she tells him that she doesn't want to leave and must convince her Grandfather to let her stay. Peter tells her to do this a little bit at a time. Heidi decides that she will show her Grandfather just how much she needs him... and he needs her ("You Can Do It"). But first, she and Grandfather need to start talking. Peter takes Heidi to the house and initiates conversation with Grandfather. Grandfather slowly and reluctantly begins to talk to Heidi and he soon lets her share in some of the chores ("A Little Bit of Talk").

Grandfather gradually begins to care for, and grow protective of, Heidi. When winter comes, Heidi cannot stand being inside all of the time and pleads with him to take her to the village. The old man refuses to go and doesn't want her to go, either. He feels that he's not welcome in the village. He thinks that people blame him for his daughter's death, saying that, had he not sent her away, she might never have died. Grandfather grows very vulnerable, and it is clear that he is finally letting Heidi into his heart. This realization frightens him, and he coldly pushes her away. Heidi is very hurt by this, and seeing her pain makes Grandfather realize that it is time for him to change. He pretends to need help getting up and asks Heidi for assistance. She happily offers help and support, and they both understand the meaning of this gesture.

The action moves to the Sesseman house in Frankfurt, Germany, at the prominent household where Dete is working as a governess. The mother of the household is dead, and the little girl, Clara, is confined to a wheelchair. Dete wheels Clara to visit with her father, Herr Sesseman, who tells his daughter that he needs to go on a business trip to London for a few months. Clara is upset that her father is once again leaving, but there is nothing that can be done. Her father suggests that she needs a companion of her own age, but Clara disagrees. Herr Sesseman, however, thinks that it is the perfect solution and leaves the matter in Dete's hands. Dete thinks that bringing Heidi to stay with them might be the best solution.

Back on the mountain, Grandfather has grown very happy to have Heidi living with him. He makes her a new stool as a sign that he wants her to stay. Dete arrives unexpectedly and asks to speak with Grandfather privately. She presents him with the idea of having Heidi live with her in Frankfurt, but Grandfather refuses to let Heidi go. Dete is surprised and confused by his change of heart. Unfortunately, Dete is Heidi's legal guardian and demands that he give up the girl. Heidi doesn't want to leave, and nothing is explained to her, leaving her to believe that Grandfather doesn't care about her anymore.

On the way to Frankfurt, Dete tries to show Heidi how to be a perfect young lady, since she will be living in a rich household ("Everything Is Changing"). In Frankfurt, Clara is not interested in meeting Heidi and plans on making it impossible for her to stay. On the other hand, Sebastian, one of the household servants, is looking forward to having another little girl around and is hopeful that she will have a sweeter disposition than Clara's. When they all finally meet, Sebastian is quite taken with Heidi, but Clara hates her at first sight.

Heidi makes Clara feel uncomfortable by telling her that she doesn't look sick. Clara quickly explains that she is an invalid and cannot walk; she is confined to a wheelchair forever. Clara doesn't want to talk anymore and has Dete take her to her room. Sebastian offers Heidi a cup of hot milk and tells her that, ever since Clara fell off her horse last summer, she's been unable to walk. The doctor can't tell them why, and many people think that Clara is just afraid to try.

Dete returns and asks Sebastian to leave her alone with Heidi. Dete yells at Heidi for being rude to Clara and insists that she apologize tomorrow. Dete has certain "plans" concerning her place in the household and does not want Heidi to ruin them. Heidi promises to do just as her aunt has instructed.

Back on the mountain, Grandfather is sitting on a tree stump, slumped over and wrapped in a blanket, coughing. Peter is upset to see how distraught he is over losing Heidi and quickly goes to fetch the doctor.

In Frankfurt, Heidi and Clara can't seem to get along. It has been three months, but nothing has changed. Peter arrives and surprises Heidi by telling her that he has come to take her back to the mountain. He says that Grandfather hasn't been the same since she's been gone. Heidi does not understand this, as it was he who let her go. Peter tells Heidi that it was Dete, not Grandfather's, doing. Just then, Dete finds Peter and demands that he leave or she will call the police. Heidi asks Peter to tell Grandfather that she will find a way back to the mountain.

Clara wheels herself in the room, and Dete tries to attend to her. When questioned by Clara about all that is going on, Dete only says that she wants "one big happy family."

Left alone, Clara and Heidi talk about how much they don't like Dete. To Heidi, it is quite evident that Dete wants to marry Clara's father, and that's why she is so nice to Clara all the time. She also suspects that Dete doesn't want Clara to walk, since, as long as Clara is an invalid, Dete will be needed. Heidi tries to help Clara realize that she can walk and soon has Clara standing up tall ("You Can Do It – Reprise"). Sebastian is amazed by what he sees. He gives Clara a letter from her father, saying that he will return in six weeks, for his daughter's birthday. She decides that, with Heidi's help, she will be walking by then. Sebastian promises to keep this a secret from Dete.

Herr Sesseman arrives home and is greeted by his daughter, who slowly walks to him. Clara gives all of the credit to Heidi. She further tells her father the truth about Dete. Dete loses her temper with Clara, and Herr Sesseman quickly dismisses her. Dete indicates that she wants Heidi to follow her, but Heidi stays behind.

Herr Sesseman asks Heidi what he can do to repay her, and she only asks to be returned to her Grandfather. He agrees to take her back the very next day. Clara will go as well ("Everything Is Changing").

Heidi returns to the mountain to find her Grandfather sitting at the table, staring at the photograph of his daughter ("The Mountain Is Saying Goodnight"). When he sees Heidi, he is overcome with joy. She tells him that she knows why he sent her away, but she's back now... for good. Grandfather is a changed man. He wants to meet Herr Sesseman and Clara and even offers to take Heidi down to the village on a walk. Peter joins them, and they all venture down the mountain to explore a new life that lies ahead ("Come Along – Reprise").