Lucifer conducts a train full of condemned souls, including Ms. Merrywood, back up to Heaven. As the train approaches Heaven’s gates, Ms. Merrywood discovers a horseshoe pendant and the condemned souls begin singing hymns (‘’Shovel and Bone’’). In Heaven, God discusses the crisis with his top dog, The Agent. The Agent and The Translators, officers in Heaven’s police force, interrogate Merrywood about her presence and the pendant. In Hell, the Ticket-Keeper warns Lucifer that the carnies are not prepared for a war with Heaven, but Lucifer dismisses him to entertain a cloaked figure. Lucifer opens his book of Aesop’s Fables and reads “The Filly and The Lapdog” to the cloaked person.

In flashback, a new crop of Applicants arrive in Heaven, including best friends June and Cora. They are welcomed into Heaven and are offered a tour of the premises (‘’All Aboard (Everybody’s Doing The Ark’’). June defies The Librarian about banned books in Heaven and steals a Number 1 armband from The Designer, who keeps the Number 7s working in a windowless design shop, that starkly contrasts with the grandeur of the Heaven lobby (‘’Only By Design’’). June’s rebellious nature makes her and the reserved Cora wander around Heaven, only to be arrested and interrogated by The Translators (‘’Good Little Dictation Machines’’). The Agent intervenes, and there is a mutual attraction between him and June, which gets him negative press from The Watchword. When God becomes aware of this, he orders The Agent to seduce June to expose her heresy.

The Agent brings June to a bar, Club Cloud Seven, where his closeness with God leads him to be invited to sing (‘’Down at the Midnight Rectory’’). God arrives and serenades one of his girlfriends (‘’Cloud Serenade’’). The Agent and June’s relationship continues, always under the watchful eye of The Watchword (‘’The Watchword’s Hour’’). The Watchword confronts Cora, warning her that her lesbian attraction to June is forbidden and illegal in Heaven. The Agent reignites June’s curiosity with banned material and she runs off to steal a restricted book. Confident that The Agent’s clout will protect her, she steals a book, setting off an alarm. June is beaten by The Translators and tossed down an elevator shaft leading to Hell. Meanwhile, The Librarian instructs Cora and the other Applicants to denounce June, and spend the rest of the night restoring order by re-shelving Heaven’s library with him (‘’Hitting on All Sevens’’). The Librarian tells Cora she will go far in Heaven.

June arrives at a weaker, smaller Carnival, with a younger Lucifer and Ticket-Keeper. She flees from The Fool and finds The Twin and asks him for a drink. The Twin obliges as long as she play a shell game for her pendant. As the game goes on, The Twin shapeshifts into Cora, The Agent, and finally, June herself (‘’Fair Game’’). Upon losing, June wanders into the midway and finds Lucifer, who becomes inspired by her to turn the Carnival into something that can challenge Heaven. He helps her transform into The Painted Doll (“After the Fall”).

In the present, Ticket-Keeper rebuffs several plans to attack Heaven from the carnies. The cloaked figure is revealed to be Painted Doll, who will play a role in Lucifer’s war with Heaven. Ticket-Keeper confronts Lucifer about his worries with the Carnival, offering to sacrifice himself for the cause. Lucifer refuses Ticket-Keepers martyrdom and shows him his plans for the war. Meanwhile, in Heaven, God dispatches The Agent to face Lucifer and quell the uprising in Hell, giving him a book containing the story “The Filly and the Lapdog”. God puts on a presentation for the denizens of Heaven, mocking Lucifer in a parable drawn from the Dust Bowl and Aesop’s Fable “The Swallow and the Other Birds” (‘’Bells of the Black Sunday’’).

The Agent arrives in Hell and finds Painted Doll. She leads him on to give the carnies time to capture and poison him. Lucifer prepares for battle by applying war makeup as God sends armed reinforcements down to Hell. In Heaven, Ms. Merrywood is revealed to be The Twin, now posing as The Agent returning from his mission (‘’Hoof and Lap/The Devil’s Carnival’’). In a post-credits sequence, The Twin as The Agent serenades God (‘’Songs of Old’’).