During the Prohibition era, the story unfolds with a notorious mobster named Roxy Robinson, who faces a grim fate at the hands of a rival gang armed with rapid-fire cream-shooting “splurge guns.” Once a gangster is “splurged,” they are deemed “all washed up… finished.” The tale is narrated by mob boss Fat Sam Staccetto, who introduces us to Bugsy Malone, a down-on-his-luck boxing promoter who, while “a little too popular with the broads,” is ultimately a nice guy.

At the vibrant Fat Sam’s Grand Slam Speakeasy, a hub of dancing and singing, the atmosphere is electric, but tension looms as Fat Sam mourns the loss of Roxy, one of his finest men. He suspects up-and-coming rival mob boss Dandy Dan of encroaching on his territory. Amidst this chaos, aspiring singer and actress Blousey Brown attempts to secure an audition; however, Fat Sam is too distracted to notice her. Bugsy encounters Blousey when he trips over her luggage, and he’s instantly enchanted, eager to flirt with her. Just then, the speakeasy falls prey to Dandy Dan’s gang, who wreak havoc.

As weeks pass, Dandy Dan’s attacks on Fat Sam’s empire escalate, ultimately leading to the takeover of all of Sam’s rackets and the splurging of his gang members. Amidst the chaos, Sam discovers his men fooling around, prompting him to send them out, sans his personal enforcer Knuckles. However, they fall victim to an ambush.

Bugsy returns to Fat Sam’s, intent on arranging another audition for Blousey. In a twist of fate, he encounters Fat Sam’s girlfriend, the alluring Tallulah, who attempts to seduce him. Although Bugsy rebuffs her advances, Tallulah leaves her mark with a kiss just as Blousey enters, igniting jealousy that inspires Blousey’s heartfelt performance of “I’m Feelin’ Fine.” Impressed, Fat Sam hires her, leading to a brief separation from Bugsy.

Sam enlists Bugsy as a driver to attend a truce meeting with Dandy Dan, accompanied by top enforcer “Looney” Bergonzi. The meeting turns out to be a trap, but Bugsy cleverly aids Sam’s escape, earning a reward of $200. Following this, Bugsy and Blousey share a romantic day by the lake, with Bugsy promising her a journey to Hollywood. Sadly, upon returning a car to the garage, Bugsy is ambushed, but is rescued by Leroy Smith, who showcases his potential as a boxer. Bugsy helps him connect with boxing coach Cagey Joe, igniting a new path for Leroy.

As Fat Sam continues to struggle, he requests Bugsy’s help again after a mishap leaves Knuckles dead at the hands of a faulty splurge gun. Although reluctant, Bugsy is tempted by a $400 offer from Sam, far exceeding his own plans for Blousey. Disheartened, she learns of his inability to purchase tickets to California, leading to a poignant performance of “Ordinary Fool.”

In an unexpected turn, Bugsy and Leroy discover Dandy Dan’s stash of guns. Realizing they cannot confront Dan’s gang alone, they rally a group of down-and-out workers from a soup kitchen. Together, they successfully raid the warehouse, reclaiming the stolen arms.

As they regroup at Fat Sam’s, they don disguises and wait for Dan to arrive, kicking off a whirlwind of cream-filled chaos as a massive splurge gun battle erupts. Amidst the frenzy, unarmed patrons hurl cream pies, creating a mess without any casualties. The pandemonium culminates when Razamataz, the piano player, falls onto the keys, striking a single bass chord that brings the wild scene to a tranquil pause.

In this magical moment, the cream-covered crowd recognizes a chance for camaraderie, leading them to perform their final number, “Bad Guys Reprise / You Give a Little Love,” as Bugsy and Blousey make their way to Hollywood, ready to embrace their dreams.