==STORYLINE==1962 to New Year's Eve, 1966
Backstage at an amateur talent show at the Detroit Theatre in 1962, Cadillac salesman Curtis Taylor, Jr. meets a girl group known as "The Dreamettes": lead singer Effie White and back-up singers Deena Jones and Lorell Robinson. Curtis presents himself as the Dreamettes' new manager and arranges for the Dreamettes to become backup singers for local R&B star Jimmy "Thunder" Early.
With ambitions of making black singers mainstream successes among white audiences, Curtis starts his own record label, Rainbow Records, out of his Detroit car dealership, and appoints Effie's brother C.C. as his head songwriter. However, when their first single fails after a white pop group releases a cover version, Curtis, C.C., and their producer Wayne turn to payola to make Jimmy and the Dreamettes pop stars. Offstage, Effie becomes infatuated with the slick-talking Curtis, while the married Jimmy begins an affair with Lorrell.
Jimmy's manager Marty grows weary of Curtis' plans to make his client more pop-friendly and walks out. However, when Jimmy bombs in front of a mostly white Miami Beach audience, Curtis sends Jimmy out on the road alone, keeping the Dreamettes behind to headline in his place. Feeling that Effie's large figure and distinctive voice will not attract white audiences, Curtis appoints the slimmer and higher-voiced Deena lead singer and renames the group "The Dreams".
With the aid of new songs and a new more glamorous image, Curtis and C.C. transform the Dreams into a top selling mainstream pop act by 1965. However, Effie begins acting out, particularly when Curtis' affections also turn towards Deena. Curtis eventually drops Effie (who has just learned she is pregnant with Curtis' child) from the group, hiring his secretary to take her place.
1973 to 1975
Seven years later, in 1973, Effie has become an impoverished welfare mother, living in inner-city Detroit with her daughter Magic. Meanwhile, Rainbow Records has moved to Los Angeles, where the Dreams—now "Deena Jones & the Dreams"—have become superstars. With Rainbow the biggest black-run business in the country, Curtis is now attempting to move into film production with a film about Cleopatra starring an unwilling Deena, now also his wife. Jimmy Early, on the other hand, has descended into drug addiction, his career neglected due to Curtis' preoccupation with Deena. When Jimmy has a breakdown onstage at Rainbow's tenth anniversary TV special the following year, during which he drops his pants in front of the audience and cameras, Curtis drops him from the label, and Lorrell ends their long affair. Some time later, Jimmy is found dead in a hotel room from a heroin overdose.
Angered over Curtis' increasing control over his music, and his lack of sympathy upon learning of Jimmy's death, C.C. quits and returns to Detroit to find Effie, who has been rebuilding her career in music with Marty as her manager. The two siblings reconcile, and C.C. writes and produces Effie's comeback single, "One Night Only". Just as the record begins gaining radio play in Detroit, Curtis uses payola to force radio stations to play a disco cover of "One Night Only" by Deena Jones & the Dreams instead. His plan falls apart when Deena, angry over Curtis' control of her career, finds evidence of his payola schemes and contacts Effie and C.C., who arrive in Los Angeles with Marty and a lawyer.
Deena and Effie reconcile, while Curtis, wanting to avoid being reported to the FBI for payola, agrees to give Effie's record national distribution. Inspired by Effie's victory, Deena leaves Curtis to make it on her own.
As a result, Deena Jones & the Dreams give a farewell performance at the Detroit Theater. At the conclusion of the concert, Deena invites Effie to join the group onstage and sing lead for the final performance of the group's signature song, "Dreamgirls." As the concert ends, Curtis notices Magic in the front row and realizes that he is the girl's father.
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