In the shadows, a young man sprays graffiti onto the awning of a bodega, but his artistic reverie is interrupted when the store owner, Usnavi, enters and chases him away ("In the Heights"). Usnavi opens his bodega and supplies everyone with their morning coffee and papers. We meet the major characters and neighbors as they pass by his bodega. As the morning rush subsides, Nina Rosario enters, home at last from her freshman year at Stanford. In a moment alone, Nina reveals that she struggled at college ("Breathe").
Meanwhile, Nina's parents seek an emergency loan from the bank to keep their struggling taxi dispatch afloat. They leave Benny, a young employee, in charge of the dispatch for the first time ("Benny's Dispatch"). At the hair salon across the street, Vanessa has financial troubles of her own. Vanessa dreams of escaping to a studio in the West Village, but doesn't have enough money to do so ("It Won't Be Long Now"). When she stops by Usnavi's bodega, Sonny asks Vanessa out for Usnavi, and she accepts.
When her parents return, Nina becomes nervous and reveals to them that she lost her academic scholarship and dropped out of Stanford. Her father, Kevin, is devastated that he cannot provide tuition without the scholarship ("Inútil"). Nina seeks comfort from her friend Vanessa, but the salon owner, Daniela, sits her down for a makeover and gossip session ("No Me Diga"). Daniela decides to tease Vanessa by telling her that Usnavi slept with one of the neighborhood skanks, just to see how Vanessa would react. Vanessa reacts in a way that shows that she likes Usnavi, but does not truly recognize it.
After Usnavi discovers he sold a winning lottery ticket worth $96,000, everyone on the block dreams of how they would each spend the small fortune ("96,000"). Later, Abuela Claudia reflects on her childhood journey from Cuba to New York in 1943, remembering her mother saying "patience and faith" along the journey ("Paciencia y Fe"). She reveals that she holds the winning lottery ticket.
Nina and Benny find themselves alone on the street. Nina admits that she felt like an outsider at Stanford, and Benny says that being the only African-American in a Latino-run business can be intimidating. The two take a tour of the neighborhood landmarks around which they grew up ("When You're Home").
At a dinner party, Kevin announces that he has sold Rosario's Car Service to pay for Nina's tuition. His news is met with anger. Nina follows Benny to a dance club, apologizing, but he is furious at Kevin's decision, which has put him out of a job. Vanessa and Usnavi enter the club and begin to dance ("The Club"). Tensions rise on the dance floor because Vanessa and Usnavi are attempting to make each other jealous.
Suddenly, the power goes out throughout the city ("Blackout"). Chaos ensues, and Usnavi loses Vanessa in the darkness, while Sonny and Graffiti Pete are at the bodega protecting it from vandals and trying to distract them with fireworks. Abuela Claudia reveals to Usnavi that she won the lottery. With fireworks exploding in the sky, Nina and Benny find each other and kiss.
