The film opens in 1936, New York City, where Billie Holiday (Diana Ross) is being placed under arrest. After being finger-printed and placed into a straight jacket, Billie is locked in a jail cell.
The film then flashes back to 1928. Billie has an encounter with a rapist (Harry Caesar). She is rescued by a madame (Isabel Sanford). After returning to her Aunt Ida's (Lynn Hamilton) house, Billie accidentally leaves the door open, puts on a record, giving the rapist the chance to slip inside; Billie is raped. Following the incident, Billie runs away to her mother (Virginia Capers), eventually being escorted to the house by a police officer. Mama Holiday feeds Billie and sets up a job to clean at a brothel in the Harlem section of New York City. The brothel itself is run by an arrogant, selfish owner named Ms. Edson (Paulene Myers), who pays Billie very little money.
One night, Billie sneaks into a nightclub/bar with black showgirls, owned by Jerry (Sid Melton). Jerry tries to get rid of Billie, who claims that she knows every single song out to date. She sees Louis McKay (Billy Dee Williams), he smiles at her, then a guard comes, picks Billie up and kicks her out of the nightclub. Eventually, Billie tires of scrubbing floors at the brothel and becomes a prostitute. After impulsively quitting prostitution, Billie heads to the club she was once kicked out of, and auditions with the showgirls. Jerry tells her to leave when she does not quite catch up with the girls' dancing moves. Billie then speaks to a man, who becomes her best friend; Piano Man (Richard Pryor), who plays the song "All of Me". Jerry then witnesses her talent for singing, and books her for a show, beginning Billie's career as a singer.
Billie debuts at the nightclub. Her set is not successful with the audience which ends up booing her. Louis, who surprisingly arrives at Billie's debut, giving her fifty dollars. Billie, then takes the money, and sings "Them There Eyes". Louis mysteriously disappears during Billie's set. Billie takes a liking to Louis and begins dating him. Eventually, she is discovered by two men: Harry (Paul Hampton) and Reg Hanley (James T. Callahan), who sign her as a soloist for their southern tour in hopes of landing a radio network gig. During the tour, Billie experiences an overwhelming, and fateful moment; she witnesses the aftermath of the lynching of an African-American man, which presses her to record one of the most controversial songs in history ("Strange Fruit"). The harsh experiences on the tour result in a dependency on drugs, which are supplied by Harry. One night when Billie is performing, Louis comes to see Billie and waits for her in her dressing room. He knows that she is doing drugs and tells her she is going home with him, he loves her and that it is for her own good. He tells her he can tell by her singing voice that she is on drugs, but she denies being 'hooked.' She promises to stay off the drugs if he stays with her. He says again that she should go home with him, but she firmly refuses, but again promises no drugs. Billie continues to tour the South to equally disastrous personal results.
Back in New York, Reg and Louis manage to arrange her radio debut, but the station does not call her to sing; unfortunately, her work on the tour has been for naught: the radio sponsors object to her race. The group heads to Cafe Manhattan to drown their sorrows. Billie has too much to drink and she asks Harry for drugs, saying that she doesn't want her family to know that the radio show upset her. He refuses and she throws her drink in his face. She is ready to leave, but Louis has arranged for her to sing onstage at the Cafe, a club where she once aspired to sing. She obliges with one song but refuses an encore, leaving the club in urgent need of a fix. Louis, more than suspicious that she's broken her promise to clean up, takes her back to his home, where she has been staying, but refuses to allow her access to the bathroom and her kit. She fights Louis for it, going so far as to pull a razor on him. Saddened, Louis leaves her to shoot up, telling her he doesn't want her there when he comes back. Their relationship has come to an end.
She returns to the Harlem nightclub, where her drug use is intensified until, upon news of the death of her mother in the hospital, she is prompted to check herself into a drug clinic. Unbeknownst to her, she cannot pay for her own treatment. The hospital secretly calls Louis, who comes to see her and agrees to pay her bills without her knowledge. Impressed with the initiative she's taken to try to straighten herself out, Louis proposes to her at the hospital and leaves to purchase a ring. Just as things appear to be looking up, she is arrested for having been in possession of narcotics and removed from the controlled environment of the clinic.
In prison, without any medical supervision or assistance, Billie is going through crippling withdrawal. Louis brings the doctor from the hospital to treat her, but she is incoherent. He puts a ring on her finger to remind her of his promise, but must leave the jail cell. Soon, Billie has done her time and comes home. She tells her friends that she doesn't want to sing anymore. Billie marries Louis and pledges not to continue her career. However, the lure of performing is too strong and she returns to singing with Louis serving as her manager. Unfortunately, her felony conviction has stripped her of her Cabaret Card, which would allow her to sing in NYC nightclubs. To restore public confidence and influence the Commission to reinstate her license, Billie agrees, at Louis' urging, to embark on a cross-country tour. Over the following months, Billie's career takes off on the nightclub circuit.
Unfortunately, Louis leaves for New York to help arrange a comeback performance for her at Carnegie Hall, leaving Billie to head to California without him. Despondent at Louis' absence and the seemingly never-ending stream of venues, with them no nearer to their goal of Carnegie Hall, Billie succumbs to a moment of weakness. She asks her friend, known only as Piano Man, to pawn the ring Louis had given her and to use the money to buy drugs for her; reluctantly, he agrees. While they are in the throes of their high that evening, Piano Man's drug connections arrive, more than a little upset; apparently, he had neither pawned her ring nor paid for the drugs he procured. Piano Man is fatally beaten by the dealers while Billie witnesses the brutal attack. Ironically, within the hour, Louis and her promoter Bernie call a hysterical Billie with news that they got her Carnegie Hall. Louis returns to find a very fragile Billie; it is obvious that she is quite traumatized and has fallen back into drugs after the murder. Louis packs her up and takes her back to New York.
Billie plays to a packed house at Carnegie Hall. Her encore, "God Bless the Child," is overlayed with newspaper clippings highlighting subsequent events: the concert fails to sway the Commission to restore her license; subsequent appeals are denied; she is later re-arrested on drug charges; and finally, "Billie Holiday Dead at 44." Nevertheless, the Carnegie triumph is frozen in time.
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