Mr. Gordon is so utterly impressed that he hops over the railing toward them, blissfully exclaiming: "Sheer heaven, my dear, sheer heaven!" He restores Penny's job and makes an appointment for them with owner Mr. Al Simpson (Pierre Watkin) to tryout as performers at his swanky Silver Sandal night club: "Penny, you wear your white lamé gown. That's how I see you - you in white and Mr. Garnett here in dinner clothes." Without telling Penny, Lucky anticipates a problem - he does not own a dinner jacket for the audition. Meanwhile, in a clever parody of their wonderful duet, Pop dances with Mabel around the dance floor to try and restore her lost job as well, but they break one side of the railing when hopping over it and engender Mr. Gordon's continuing wrath: "You are still fired."

Lucky attempts to use his gambling skills (in a game of strip piquet) to win a suit of evening clothes for the audition against a drunken, well-dressed gentleman named Eric Facannistrom (Gerald Hamer) - whose dinner jacket would be the correct size for Lucky's thirty-six inch chest. Unfortunately, Lucky loses both the chance to audition and his pair of pants - as he did in the first scene - and must wrap himself up in the game table's tablecloth when Penny arrives and discovers her undignified dance partner gambling. When he attempts to explain, she refuses to talk to him.

So he and Pop picket in the hall outside Penny's apartment room, wearing placards that read: "PENNY CARROL UNFAIR TO JOHN GARNETT." After a week of picketing, Mabel sympathetically encourages them: "Keep up the good work, boys, the public is with you."

Lucky has scheduled a second audition for them and "bankroll-ed" himself to prosperity through gambling, but Penny stubbornly refuses to see him: "I like being stubborn where he's concerned." Mabel suspects that she is in love with him, but she denies it:

Mabel: It must be love.
Penny: How could I fall in love with a common gambler?
Mabel: Penny, when a man takes a little quarter and builds it into a bankroll that would choke a horse, and makes my little ten dollars grow into hundreds, I'd call him an uncommon gambler.

While Penny remains annoyed and is shampooing her hair in the next room, her conniving girlfriend lets in her "comrade," encouraging him: "You're a big success. She's willing to arbitrate." He sits down at a piano and serenades Penny with the lyrical, romantic, melancholy ballad: "The Way You Look Tonight" - an exaltation of her charming beauty - in contrast to the way she actually looks:

Someday, when I'm awfully low, and the world is cold
I will feel a glow just thinking of you, and the way you look tonight.
Oh, but you're lovely with your smile so warm, and your cheeks so soft
There is nothing for me but to love you, just the way you look tonight.
With each word your tenderness grows, tearing my fear apart
And that part that wrinkles your nose, touches my foolish heart
Lovely, never never change, keep that breathless charm
Won't you please arrange it 'cause I love you, just the way you look tonight.

Drawn and bewitched by his declaration of love, she emerges in an old bathrobe from her room forgetting that her head is covered with sudsy white shampoo, and lightly rests her hand on his shoulder. As he sings the final words, "just the way you look tonight," he turns and is startled to see her foamy, lathered white hairdo - she rushes embarrassed from the room.

At the second scheduled audition at the Silver Sandal nightclub, the orchestra leader - a detestable tenor named Ricardo Romero (George Metaxa), is also in love with Penny. According to her, "he's asked me to marry him several times." Romero is disagreeably "jealous" of her new dance partner, and petulantly refuses to play for their dance audition: "There isn't going to be any music...I promised you could dance anytime you want - alone." Mr. Simpson won't back their request to have Romero play, because he's gambled away his musician to a rival nightclub/gambling casino owner, Dice Raymond (John Harrington): "I lost his contract last night playing cards. He's now the property of Dice Raymond."

On the 36th Floor where Raymond's club is located above a snowy, wintry Manhattan cityscape, Penny and Lucky (with his lucky quarter) have gone there to gamble at roulette (and dance), but Romero arrives as the club's new bandleader. Pop reminds Lucky of his obligations to earn $25,000 to marry his fiancee Margaret. Noticing his interest in gambling, Dice Raymond bets Lucky "double-or-nothing" on his winnings. Instead, Lucky wagers for Romero's contract ("all my winnings against his contract") and wins the bet (with Pop's card-shark help), but the pompous maestro (who considers himself "a valuable piece of property") still refuses to play a waltz for his new 'owner' because it's after-hours: "If you read the contract carefully, you'll see I don't have to play after this hour unless I want to."

Lucky coaxes Romero to accompany them with music [for the audition?] by publicly announcing the start of the lovely "Waltz in Swing Time," and holding up his baton hand for him to play. On the dance floor of the mirror-shiny Art Deco nightclub, Penny is wearing a pale-colored, white evening dress with Cuban-ruffled sleeves and a wide-flounce, sheer trimming on the hem, while Lucky is in a black tuxedo with a black Bohemian tie and white carnation in his lapel. During the fast waltz, the two dancers weave intricate dance steps, sometimes as partners, or sometimes as soloists paralleling each other. They introduce an unusual back-kick into their gliding movements mid-way, and finish with a flourish of speed as they twirl behind a translucent, louvered glass screen.

The next day, Lucky and Penny are obviously in love, beaming smiles at each other in the front of a car. She is frustrated and puzzled however, and senses an aloofness, ambivalence, and distance from him: "He seems to have something on mind." Likewise, he has a dilemma - a tug-of-war with his emotions and a concern that he is keeping his engagement to another woman a secret: "I can't go on like this without her knowing something about Margaret and well, I just haven't got the nerve to come out and tell her, that's all." To keep his defenses up and avoid compromising himself, even though he's in love with Penny, Lucky encourages Pop to help prevent him from being all alone with her.

The two couples, Pop and Mabel, and Penny and Lucky, drive together on a snowy outing (in an open convertible) to The New Amsterdam, now a broken-down country lodge where Mabel used to visit when she was younger. The setting is a winter wonderland of gently falling snow, icicles, and snow-covered branches. With her arm through his, Penny (dressed in a shearling wool coat and Dutch-boy cap) snuggles up next to Lucky to keep warm on a tree-bench but he deflects her flirtation by staring straight ahead. They wander off and sit inside a snow-covered gazebo in the woods:

Penny: I like being off alone like this.
Lucky: You're not alone. You're with me.
Penny: Then I like being off alone with you.

As she cozily snuggles into his shoulder, he resists again by suggesting that she flap her arms to keep warm, rather than taking her into his arms: "Flap your arms. That will restore circulation. Look, it makes me feel warmer already." When his arms finally encircle her, she tries to get him to express his unspoken, romantic feelings:

Penny: If some people saw us like this, they might think that we were...that we liked each other.
Lucky: Yes, they might.
Penny: It's funny how we met and all that's happened to us since.
Lucky: The way we've been, sort of, thrown together and everything.
Penny: As if it were all meant to happen.
Lucky: It's quite an experience.
Penny: It's more than an experience. It's sort of like a, a romance, isn't it?
Lucky: Yes, as we say in French, la belle romance.
Penny: A swell romance.

When Pop yells out a warning to him ("Lucky!"), Lucky rebuffs her and deflates the romantic mood: "You ought to be wearing galoshes." She rises disgustedly: "I think we'd better go home," turns and complains by singing the bitter, accusatory, sarcastic song, "A Fine Romance":

A fine romance with no kisses, a fine romance my friend this is,
We should be like a couple of hot tomatoes, but you're as cold as yesterday's mashed potatoes
A fine romance you won't nestle, a fine romance you won't wrastle
I've never mussed the crease in your blue surge pants, I've never had the chance,
This is a fine romance...

Lucky approaches and apologizes for disappointing Penny, and to courageously prove that he isn't aloof, he is about to embrace and kiss her when a snowball hits his hat - thrown by Pop to deliberately break them up. Lucky forms a snowball and heaves it back, but strikes Mabel in the face. While Lucky apologizes to Mabel, Pop inexplicably tells Penny about Lucky's engagement: "...if Lucky gets $25,000 ahead, he has to go back and marry that girl...the girl he's engaged to." The news is a heavy, hurtful blow to Penny, and when Lucky returns to her side to be amorous, she walks away. In reprise, he reproaches her with his version of the song, "A Fine Romance":

A fine romance with no kisses, a fine romance my friend this is,
True love should have the thrills that a healthy pine has
We don't have half the thrills that The March of Time have
A fine romance with no clinches, a fine romance with no pinches
You never give the orchids I send a glance, no, you like cactus plants
This is a fine romance...

The Silver Sandal nightclub is re-opened with a refurbished interior, including an orchestral pit and dance area surrounded by a half-circular, glistening black staircase and glittering tables positioned for couples. Backstage, wearing a white, low-cut, V-necked, satiny sheer evening gown with cross-your-heart pleats and a cape (held about her neck with a rhinestone choker), the whitish-blonde Penny expresses her unhappiness and disinterest in Lucky. With a daring challenge, Mabel encourages Penny to express her love for him by giving him "a great big kiss":

Mabel: I supposed it doesn't interest you to know that he was supposed to go back and marry that girl as soon as he got twenty-five thousand dollars.
Penny: Well, why doesn't he go back?
Mabel: Because he doesn't want to, and you know it. He's given up gambling. (sarcastically) Certainly looks as if he's trying hard to go back to her, doesn't it?
Penny: Oh, what am I supposed to do?
Mabel: Why don't you go up and give him a great big kiss?
Penny: Oh, don't be silly. I wouldn't do that even if I wanted to.
Mabel: You mean you haven't got the nerve.
Penny: Oh, I've got nerve.
Mabel: But not enough.
Penny: Oh yes I have.
Mabel: Not enough for that.
Penny: I've got enough nerve to do anything.

The camera tracks backward as she approaches his backstage dressing-room, nervous and hesitant but with great yearning. She loses her resolve when the big moment comes, however, and asks instead: "How do ya like my dress?" As he compliments her on her dress, she backs away. They finally clinch a coy kiss - out of sight - behind his opening dressing-room door, but residual panting breaths and self-conscious smirks linger long afterwards. They giggle at each other like two goofy adolescents:

Lucky: (with her lipstick smeared on his lips) It's nice.
Penny: You like it.
Lucky: (elated) I certainly do.
Penny: Thanks! Goodbye.

Lucky is called onstage to perform a huge production number, his solo 'blackface' dance (makeup covers everything except his lips and eyes), "Bojangles of Harlem." The number opens when two large white panels slide apart diagonally, revealing two dozen female chorines (half costumed in black, half in white) who are singing the song's lyrics. When another backdrop panel separates, it reveals two large, black shoe soles (a caricature of a blackface head with lips, a bowtie, and derby hat). The lips, bowtie, and hat are taken away, leaving the soles. The two soles are dragged apart by the dancers to reveal two long legs ending in the mid-section of a black-faced "Bojangles" (Lucky), perched in front of a small model of Harlem - he wears a polka-dotted sports jacket, white gloves and a bowler hat. After the two legs are removed, he begins a lively, hyper-kinetic tap dance toward the camera, dancing independently of the chorines. He dances a solo in front of them, at one point assuming a familiar Al Jolson pose, and then cleverly dance-partners with three, six, twelve, eighteen, and then all twenty-four dancers as he passes back and forth in front of them. The long line of all dancers eventually breaks apart and disappears into the wings, leaving him behind.

In the final part of the tap dance, a two-minute "shadow dance" with trick photography, "Bojangles" dances in and out of synchronization in front of three gigantic, back-projected shadows of himself on a screen. The number begins with their identical, perfectly-synchronized, unified motions, but as the dance progresses, the shadows become tired and are unable to match his boundless energy - they become tired and walk off stage. "Bojangles" finishes with another frenzied solo, a combination of twirling and hand-to-foot tapping and clapping. As he jauntily shuffles off the stage, he dismissively waves goodbye with a limp wrist toward the audience- an anti-climactic gesture. When Lucky takes his curtain call in front of the audience, he is startled to notice Margaret Watson, his fiancee, seated there.

Meanwhile, Dice Raymond has learned that the wager for Romero's contract was not "on the level." Strong-arm gangsters of Dice's compel Pop to admit to Lucky: "He pulled a cold deck on you and I palmed the Ace of Spaces on him." On another draw of cards with another fixed deck, Dice wins Romero's band contract back. Margaret congratulates Lucky in his dressing room backstage for his performance. Penny finds them together and also learns the devastating news that "there isn't going to be any dance" due to his reversion to gambling: "Lucky lost the orchestra back to Raymond." Penny is very hurt: "But Lucky, you said you weren't going to gamble anymore. You promised." When Lucky introduces his fiancee to her, she is crushed a second time and departs. With "so many things to straighten out," Lucky promises to call Margaret at her hotel the next day.

In a mirror reflection, Penny and Romero stand together and hold hands on the deserted and quiet dance floor of the Silver Sandal nightclub, before a sparkling, shimmering starry background. The reflection becomes evident when Lucky, dressed in his white tie and tails, enters through the mirrored-glass doors and stands looking at them with a grave expression. She has accepted Romero's offer of marriage and wears his engagement ring. Lucky asks to speak to Penny alone. Romero permits them to speak, and climbs the staircase to the upper level and waits for her outside in the car. Both apologize to each other, but their chances for romance appear to be dashed and over:

Penny: Well, it's all decided now.
Lucky: For always?
Penny: (nodding) Yes. I'm going to marry Ricky when he takes the band to Bermuda in the spring. I'm sorry I lost my temper a while ago.
Lucky: You had every right to.
Penny: Oh no I hadn't, no right at all.
Lucky: Well, I thought you had. Goodbye. (She turns to leave) (As she fingers her bride-to-be ring) Penny! Oh, never mind, I just want to wish you good-luck and all that.
Penny: And all what?
Lucky: Whatever you want.
Penny: Does she dance very beautifully?
Lucky: Who?
Penny: The girl you're in love with.
Lucky: Yes, very. [Of course, he is referring to Penny here, not Margaret.]
Penny: (checking) The girl you're engaged to, the girl you're going to marry.
Lucky: Oh, I don't know. I've danced with you. I'm never going to dance again.

This leads to the film's song and dance highlight - as Penny climbs the staircase and stands above him, Lucky appeals to her and sings "Never Gonna Dance" (rather than talking to her) - of his broken heart and frustration, and how forlorn, pained and sad he will be without her:

Though, I'm left without my Penny, the wolf was discreet, he left me my feet
And so, I put them down on anything but the la belle ("the perfectly swell") romance
Never gonna dance, Never gonna dance, Only gonna love, Never gonna dance.

Have I a heart that acts like a heart? Or is it a crazy drum?
Beating the weird ta-toohs, of the St. Louis blues.
Have I two eyes, to see your two eyes, or see myself on my toes
Dancing to radios, or Major Edward Bowles?...

I'll put my shoes on musical trees, I'll give my rhythm back to the breeze
My dinner clothes may dine where they please, for all I really want is you
And to Groucho Marx I give my cravat, to Harpo goes my shiny silk hat
And to heaven, I give a vow to adore you, I'm starting out to be much more pos- i-tive...

As he completes the peculiar, pensive song, Penny descends a few steps and passes him on the staircase. They take each other by the hand and slowly walk side-by-side onto the empty dance floor without speaking or looking at each other. Their walk picks up speed and is transformed into a smooth gliding motion and then into a dance step, as their love affair is repeatedly and gently rekindled. The songs, dance steps and dance numbers from previous encounters in the film are woven into their dancing, e.g., "The Way You Look Tonight." At one point, as he is slumped over, she walks away from him toward the staircase, but he brings her back by spinning her around by the wrist - he faces her and gestures and pleads with her to remain. With encouraging movements, she follows his lead, as the music changes from "Never Gonna Dance" to "Waltz in Swing Time" and they hop-leap and pirouette. Soon, they separate and dance up the two sides of the curved staircase, spinning their way to the upper landing at the top [filmed with a well-executed crane shot], where they experience one final flurry of propelled spins and twirling turns - her pirouettes in her white gown glow fiery and bright. She runs from his grasp and exits without him, leaving him posed again in dark despair after her disappearance.

In the final sequence in the film, all loose ends are tied and the two protagonists are re-united, as expected. In her hotel room, Margaret admits to Lucky, first in a written note and then in words, that she isn't in love with him after all ("I can't marry you") and wants to marry another hometown suitor Charlie Shaw. His relieved reaction is unusual to her: "Gee, that's swell!" She had avoided adding to his "trouble" the night before so she postponed telling him. Then, he confesses his love for someone else - "with that girl you saw." They share a mutual laugh about their tangled perceptions: "Was she [Penny] angry at you [Lucky] because of me?" asks Margaret. When Pop and Mabel join them in the scene, the laughter becomes more contagious. However, the laughter abruptly stops when Pop reminds Lucky that Penny is still planning on marrying Romero in the afternoon.

Before the ceremony, Lucky and Pop disrupt Romero's intentions by stealing his unstylish, uncuffed wedding pants - the same prankish delay tactic used on Lucky in the opening scene. When the two arrive at the wedding - held at the Silver Sandal nightclub, they find Mabel and Penny seated on a large settee. Penny's wedding outfit is composed of a black velvety pillbox hat with thin veil, a lamé jacket with an attached short skirt over a straight, calf-length black velvet skirt, with accessories including a draped fox stole and a string of orchids. Lucky tells Penny: "There isn't going to be any wedding," and they show her Romero's trousers. Again, howls of helpless laughter engulf everyone.

Romero arrives, to the tune of the Wedding March, wearing his valet's over-sized pants, and demanding: "Where are my pants?" Good-natured as she is, Penny joins in the laughter as she tells the minister and her groom-to-be: "There isn't going to be any wedding." Romero obligingly realizes that Penny will instead marry Lucky: "Oh, then, then you're going to marry him." Lucky serenades Penny with a bit of her song "A Fine Romance," and she counterpoints him with his song "The Way You Look Tonight," as they both overlook a snowy scene above Central Park through a picture window.

The sun shines through the clouds and falling snow as they at last kiss each other.