Original London version

Act I
Madame Giry walks alone at night on a desolate pier, reminiscing about an amusement park called Phantasma, Coney Island's former "City of Wonders". The ghost of Miss Fleck, a freak show performer who once worked with Giry at the park, appears out of the darkness ("Prologue"). When Fleck urges Giry to recall the "good old days" and blames her for "what happened", the audience is suddenly transported back in time as the old, tattered billboards are restored, the lights of Phantasma are illuminated, and an assortment of the park's performers appear in a dreamlike sequence ("The Coney Island Waltz/That's the Place That You Ruined, You Fool!").

It is now ten years after the events at the Paris Opera House and the setting is Phantasma on Coney Island in New York. An excited group of vacationers arrive, overwhelmed at all that Phantasma has to offer. They speculate about the park's reclusive, masked owner and creator, a wealthy tycoon known only as Mr. Y ("Heaven by the Sea").

Meg Giry, Christine Daae's friend from the Opera who was somewhat more intrigued by than afraid of the Phantom in their youth, is now a headlining burlesque performer at Phantasma. Madame Giry, her mother, and the Opera's former ballet mistress is now a business manager and choreographer for the show. Both Meg and her mother are eager to curry favor with their employer to secure their future; as Meg prepares for a performance as "the ooh la la girl", she wonders whether it will please him ("Only for Him/Only for You"). After the show, Madame Giry informs Meg that she has arranged for her to meet an important client, suggesting that Meg has been covertly performing sexual favors for key individuals, in the interest of political and financial expediency for Phantasma.

In a dark, private lair in a tower high above the park, the Phantom (now revealed as Phantasma's owner and mastermind) interacts with an automaton that resembles Christine ("The Aerie"). In spite of the years that have passed and his many successes, the Phantom still longs to be reunited with her ("Til I Hear You Sing"). Meg intrudes and presses the Phantom for feedback on her performance, but he is distracted by his thoughts of Christine and dismisses Meg as an annoyance. Madame Giry is irritated that the Phantom still seems to think only of Christine after all that she and Meg have done for him over the years. Giry recounts how she and Meg helped smuggle him out of Paris and to a ship departing from Calais, on which they escaped to America. Ignoring her, the Phantom summons Miss Fleck, who appears with two other freak show performers, Dr. Gangle and Mr. Squelch. The Phantom has them dispatch a letter to Christine, inviting her to come and perform at Phantasma ("Giry confronts The Phantom/Til' I Hear You Sing (Reprise)").

Three months later, Christine arrives in New York with her husband Raoul and their son Gustave, where they are greeted by crowds of paparazzi at the dock ("Christine Disembarks"). Remarks from the onlookers suggest that Christine has not performed for some time and Raoul has lost much of their fortune to drinking and a fondness for gambling. The Phantom's trio of freak show performers (Fleck, Gangle, and Squelch) arrive in a strange carriage pulled by a "ghost" horse and whisk Christine and her family away to Coney Island ("Arrival of the Trio/Are You Ready to Begin?").

In their rooms, Raoul expresses disgust that their host would send circus freaks to receive them ("What a Dreadful Town!..."). He upsets Gustave by refusing to play with him and storms out to find a bar, leaving Christine to explain his behavior to their son ("Look With Your Heart"). When Gustave goes to bed, the Phantom enters and reveals to a stunned Christine that it was he who summoned her to sing at Phantasma. Initially outraged, Christine eventually succumbs to the memory of a clandestine evening the two shared before she was married. As they recall their one night of passion, it is revealed that Christine was prepared to abandon Raoul for the Phantom, but awoke in the morning to find herself alone. The Phantom explains that he fled out of fear that she would reject him again when she saw his face in the morning light ("Beneath a Moonless Sky"). Both concede that they once thought their love had a chance, but the circumstances of the present day make it impossible ("Once Upon Another Time"). They are startled by a scream from Gustave, who awakens from a nightmare and rushes into the room ("Mother Please, I'm Scared!"). Christine introduces the Phantom as an old friend named Mr. Y, and he promises to show the boy around Phantasma the next day.

In the rehearsal studio at Phantasma, Meg is unexpectedly reunited with Christine, who surprises her with the news that she was invited there to sing. Similarly, Raoul encounters Madame Giry and discovers that it was the Phantom who brought them to Coney Island ("Dear Old Friend").

Later, the freak show trio takes Gustave to meet the Phantom in the Aerie, where the boy is enthralled by the many curious inventions and creations on display. When Gustave plays a haunting melody of his own composition on the piano, the Phantom is once again reminded of his one night with Christine and he is struck by the possibility that this musically gifted child could actually be his son ("Beautiful"). The Phantom questions Gustave about his talents and passions, finding that they are kindred spirits. Believing that Gustave will be able to see past the surface to what is inside, the Phantom is emboldened to remove the mask that hides his deformity ("The Beauty Underneath"). To his dismay, Gustave is horrified and screams at the sight, but Christine enters just in time to calm the boy. When the Phantom confronts her with his suspicions regarding Gustave's paternity, Christine confesses that the child is indeed his son, prompting the Phantom to vow that all his life's work will henceforth be for Gustave ("The Phantom Confronts Christine"). Unbeknownst to them, Madame Giry has overheard their conversation and is enraged, fearing that everything she and Meg have done for the Phantom over the years has been for nothing, as Gustave will be the sole beneficiary of his wealth and property.

Act II
A drunken Raoul is sitting alone in a forlorn bar, contemplating the evolution of his relationship with Christine ("Why Does She Love Me?"). Meg enters and warns him that New York isn't a suitable place for his family, and she urges them to abandon Christine's performance contract and leave that night. Raoul refuses, citing their need for the money; he boasts that he is not afraid of the Phantom, unaware that his rival has since slipped in and replaced the barman behind the counter. When Meg leaves, the Phantom confronts Raoul and intimidates him with veiled remarks that cause him to question his paternity of Gustave. The Phantom also offers Raoul a bet: if Christine fails to perform tonight, the Phantom will pay off all their debts and allow them to leave together, but if she sings the aria he has written for her, Raoul must go back to France alone. Raoul accepts the Phantom's dare and then experiences a moment of panic at what he has done ("Devil Take The Hindmost").

Out on the beach, the people are enjoying the last day of the summer season ("Heaven By The Sea (Reprise)"). A hot air balloon lands, carrying the Phantom's trio of freak show performers who announce the evening's entertainment lineup ("Ladies...Gents!/The Coney Island Waltz (Reprise)").

That night, Meg performs a comedic burlesque routine about her choice of swimming costume ("Bathing Beauty"). Afterwards, Madame Giry informs her crestfallen daughter that the Phantom was not there to watch her performance and it had all been for nothing ("Mother, Did You Watch?").

In her dressing room, Raoul implores Christine to reconsider her decision to sing and asks her to leave with him at once if she still loves him. When Raoul leaves her alone to think, the Phantom enters and tells Christine that Raoul knows his love is not enough, and that she must sing for him once more. When he departs, Christine recalls the fateful night at the Paris Opera House when she had to make the difficult decision between the respectable and comfortable life offered by Raoul and the passionate rush of the Phantom and his music ("Before the Performance").

Backstage, Raoul, the Phantom, and Madame Giry each wait anxiously to see whether Christine will flee or sing, while Meg entertains Gustave ("Devil Take The Hindmost (Quartet)").

The stage manager calls "Curtain" and Christine takes her place on stage. The orchestra begins to play and, after a moment of pained indecision, Christine succumbs to the Phantom's music and sings his aria for the appreciative crowd. Her performance is watched from the wings by the Phantom and Raoul until Raoul resigns himself to the decision she has made ("Love Never Dies").

Afterwards, the Phantom joins an overwhelmed Christine in her dressing room and the two share a rapturous moment ("Ah, Christine!"). Christine finds a letter from Raoul stating that he has left for good and she begins to panic when she realizes that Gustave is missing. The Phantom at first assumes that Raoul has taken the boy, but Miss Fleck reveals that she earlier passed Meg's dressing room and saw a smashed mirror and Meg leaving with a small figure. A worried Madame Giry announces that she knows where they were likely going ("Gustave! Gustave!").

On a desolate pier, the Phantom, Christine, and Madame Giry find the distraught Meg seemingly about to drown Gustave in the ocean ("Please Miss Giry, I Want to Go Back!..."). Meg brandishes a gun to make the Phantom finally pay attention to her as she describes the lengths the Girys have gone to over the years to ensure the success of Phantasma, including Meg's offering herself to men in high places to "grease the wheels of [the Phantom's] high-flying deals". The Phantom apologizes for his failure to truly see Meg and her contributions, but when he unthinkingly mentions Christine, Meg becomes enraged and accidentally fires the gun, shooting Christine. The Phantom rushes to Christine and orders Madame Giry to go for help while Meg looks on in stunned horror at what she has done. Christine reveals to Gustave that the Phantom is his real father and she tells the Phantom that her love for him will never die. The Phantom and Christine share a final kiss and she dies in his arms. The Phantom has Meg hold Christine's body as he moves to comfort Gustave, who unmasks him without fear.