Avenue Q is about real life. It's about finding a job, losing a job, learning about racism, getting an apartment, getting kicked out of your apartment, being different, falling in love, promiscuity, avoiding commitment, hangovers, Internet porn and discovering the world. A prologue on a television screen introduces us to this little corner of the world (THE AVENUE Q THEME).
Princeton is a bright-eyed college grad, who comes to New York City with big dreams and a tiny bank account (WHAT DO YOU DO WITH A B.A. IN ENGLISH? / IT SUCKS TO BE ME). He soon discovers that the only neighborhood in his price range is Avenue Q; still, the neighbors seem nice. There's Brian the out-of-work comedian and his therapist fiancee Christmas Eve; Nicky, the good-hearted slacker, and his roommate Rod - a Republican investment banker who seems to have some sort of secret; an Internet addict called Trekkie Monster; and a very cute kindergarten teaching assistant named Kate Monster. Princeton decides to move in and gets the keys to his apartment from the building's superintendent, Gary Coleman.
Later, Rod is reading his favourite book, Broadway Musicals of the 1940s, and is interrupted by Nicky, who tells him a story of a gay guy he met on the subway that morning. Rod gets extremely irritated, but Nicky assures him that if Rod were gay, he would still be by his side (IF YOU WERE GAY). Meanwhile, Princeton is pondering his life after getting fired before his first job (PURPOSE). He finds a lucky penny and hopes things will get better. He asks Kate about her goals, and she tells him about her dream - to open a special school for monsters. His curiosity peaked, Princeton asks Kate if she is related to Trekkie Monster, since since they're both monsters. Kate is infuriated and calls Princeton a racist (EVERYONE'S A LITTLE BIT RACIST).
Kate gets a call from the teacher she assists to let her know that the teacher will be having her heart replaced the next day, leaving Kate in charge of the class. Kate considers what she wants to teach her students (THE INTERNET IS FOR PORN). Later, as she contemplates her relationship with Princeton, he arrives with a gift for her (MIX TAPE) and an invitation to go out to the Around the Clock Club.
At the club, Brian displays his comic skills, to the dismay of Christmas Eve (I'M NOT WEARING UNDERWEAR TODAY). The next big act is Lucy the Slut (SPECIAL). Lucy tries to flirt with Princeton, much to the dislike of Kate, but eventually leaves in a huff after Princeton doesn't leave Kate for her. The Bad Idea Bears arrive with a suggestion to liven things up: a drinking game! The drinks flow, things get merry and soon Princeton and Kate, as well as Christmas Eve and Brian, are having sex (YOU CAN BE AS LOUD AS THE HELL YOU WANT (WHEN YOU'RE MAKING LOVE)). Although Gary gets phone calls to tell the couples to keep it down, he refuses to butt in.Elsewhere, Rod is asleep in bed. He dreams that Nicky is in love with him. Later, the night comes to a romantic conclusion when Princeton gives Kate his lucky penny (FANTASIES COME TRUE).
The next morning, Kate does not make it to school and is fired on the spot. Christmas Eve and Brian decide to get married. The friends discuss Rod's sexuality and Nicky confesses that he thinks that Rod is gay. Rod overhears and is furious, immediately informing all and sundry that he is in a long-distance, heterosexual relationship (MY GIRLFRIEND, WHO LIVES IN CANADA). He also kicks Nicky out of the apartment. Meanwhile, Princeton realizes that he is spending so much time with Kate, that he has lost track of his dreams. He breaks up with her, and she wonders whether the relationship was merely a big waste of time (THERE'S A FINE, FINE LINE).
When Act II begins, Princeton still has not found his purpose in life and he is more miserable than ever. Brian chats with him and the group takes him out for some fun (THERE IS LIFE OUTSIDE YOUR APARTMENT). They run into Lucy and Princeton brings her home. Kate sees this, and tells Christmas Eve her feelings. Christmas Eve, in therapist mode, tells Kate that she's seen it all before (THE MORE YOU RUV SOMEONE). Kate writes a note for Princeton, telling him to meet her at the Empire State Building. But Lucy finds the letter and, in a fit of anger, tears it into pieces before Princeton has a chance to read it.
Meanwhile, Nicky is trying to live on the street. He confides his problems to Gary, who surprisingly is made happy by Nicky's pain (SCHADENFREUDE). Kate is waiting for Princeton on top of the Empire State Building. When he doesn't arrive, Kate is angrily throws the lucky penny that Princeton gave her over the building. It turns out to be a very lucky penny indeed, and lands on Lucy's head. She is sent to the hospital. Princeton, Nicky, and Kate remember college and how easy life was back then (I WISH I COULD GO BACK TO COLLEGE).
Princeton meets Nicky on the street and their conversation makes his realise what he has to do. He decides to raise money towards Kate's monster school (THE MONEY SONG). They decide to ask Trekkie Monster for his help and, since Trekkie was teased as a child at regular school, and he gives the pair 10 million dollars to build a SCHOOL FOR MONSTERS. Kate gets her school and is incredibly excited and happy.
Rod eventually decides to come out of the closet. and Nicky finds a Nicky also has a brilliant idea for helping Rod. Nicky surprises Rod with a new boyfriend - Ricky - and exact replica of Nicky. Rod is ecstatic. Christmas Eve tells Kate that Princeton raised the money, and Kate is touched. Princeton offers to help her with the school, and they decide to try again (THERE'S A FINE, FINE LINE - REPRISE). Christmas Eve and Brian inform the group that they are moving out. Princeton decides that helping people is his purpose in life, but when the new tenant in Avenue Q rudely refuses his help, Princeton laments that he may not have found his purpose after all (WHAT DO YOU DO WITH A BA IN ENGLISH? REPRISE). Still, his friends reassure him that things will be brighter tomorrow if you make things count today (FOR NOW).