The curtain opens on a fairy glade, and Celia, Leila and the ladies' chorus are recalling that it is 25 years since Iolanthe (who was then the life and soul of fairyland) was banished to the bottom of a stream by the Fairy Queen for having committed the sin of marrying a mortal. Iolanthe should have died for marrying a mortal, but her sentence was commuted to penal servitude for life on condition that she cease communication with her husband without explanation immediately. She chose a stream to be near to her son, Strephon. When the Queen enters, the fairies all plead for Iolanthe to be allowed to return, and as the Queen also misses her, she relents and Iolanthe reappears, forgiven.

Now Strephon, who has a fairy mother and a mortal father is half fairy, half man - a fairy down to the waist. Ho hum.... He is an Arcadian shepherd, who is in love with Phyllis, a ward of court. He enters playing his flageolet, and inevitably sings a song. Phyllis follows him and, with a song or so, they tell us that despite the fact that they have not got the Lord Chancellor's permission, (Phyllis is a ward of court) they intend to defy him and get married anyway, as they cannot wait any longer. Being a fairy has certain embarrassments for Strephon, for instance, what will happen to him as he grows older - his bottom half will age whilst his top half remains young ? (Answers on a postcard, please....)

The Peers from the House of Lords now enter to discuss the question of a suitable husband for Phyllis, as they are all head over heels in love with her. (Don't ask why the House of Lords appear in a fairy glade, I don't know either). The Peers' chorus must be one of the most stirring pieces Sullivan wrote. After their song the Lord Chancellor enters, and the Lords ask him who should be allowed to marry Phyllis, to which the Lord Chancellor admits that he too fancies her. The Lords Mountararat and Tolloller plead their suit, at which point Phyllis comes in and tells them to their consternation that she's having none of it as she is marrying Strephon, and what is more, the Queen comes in with all the fairies and they back her up.

However, also with them comes Iolanthe, and as Strephon is pleased to see her, he goes to embrace her. Phyllis is somewhat miffed at this since all she can see is Strephon embracing somebody his own age (Remember, fairies do not age !) AND that he is surrounded by a bevy of other apparently young ladies, and so tells the Lords that she will marry either Lord Tolloller or Lord Mountararat, but as to which she does not care. As the fairies intervene, their appearance only confirms the suspicion of all the Lords that Strephon is dallying with a seventeen year old girl whilst formally paying court to one of their wards. Finally the Fairy Queen speaks on behalf of the boy, but it takes a serious threat from her to do anything. She tells the gentlemen who she is, and she appoints Strephon as a member of Parliament. What is more, both Houses of Parliament, despite their protestations shall pass any bill that he chooses. The battle lines are drawn. The Peers and the fairies make themselves ready for a war to the finish.

Act two, opens with Private Willis (another of Gilbert's characters that do not appear until Act two) standing on nocturnal sentry duty outside the Palace of Westminster. He contemplates that Parliaments have sat and risen time and time again, but the parties go on for ever. Plus ca change..... But the old order changeth and the fairies enter, singing 'Strephon's a member of Parliament' - in other words yah boo to the Peers. One of Strephon's bills is that the House of Peers will be thrown open to competitive examination, and the implications of this do not bear thinking about. Lord Mountararat expresses his annoyance at this, after all they have got along quite nicely up till now, thank you.

During his song extolling the Peerage, Celia and Leila are charmed by him and each determines to have a Peer for herself. The other fairies are similarly attracted to the rest of the Peers. The Queen has to remind them that it is death to marry a mortal, but despite this she becomes aware of Private Willis, and is very attracted to him. It must be something about the uniform....

Meanwhile, Phyllis has found herself engaged to both Lord Mountararat and Lord Tolloller, because of Strephon's apparent duplicity. The two noble Lords do not know what to do to solve their problem, and exit in confusion, passing the Lord Chancellor who is also very confused. He sings us the Nightmare song. This must be one of Gilbert's best set of lyrics as the Lord Chancellor explains his nightmare with the bizarre kind of logic only a dream can have.

After his song, Strephon enters in low spirits, and he meets Phyllis; their manner is restrained; he knows she is engaged to two noblemen and she thinks he loves another his own age. They explain this to each other and as Phyllis realises that it was Strephon's mother, they decide again to get married without delay. 'Whenever I see you kissing a young girl' she says, 'I shall know it is only an elderly relative'. Very trusting.....

Iolanthe enters to greet her prospective daughter-in-law, and meets the Lord Chancellor. The secret is now revealed: He was her husband and so Strephon is his son! In comes the Fairy Queen at this moment and catches Iolanthe and the Lord Chancellor together. So for the second time Iolanthe has broken the Fairy law and she must be punished, this time with death. By this time all the fairies are in love with the Lords, and even the Queen herself has the hots for Private Willis. What can she do? The Lord Chancellor then rises to the occasion and suggests amending the fairy law that states 'it is death to all fairies who marry a mortal' by the simple insertion of one word - 'it is death to all fairies who don't marry a mortal'. With this everybody is delighted, and all get paired off, even the Queen with Private Willis and away they all go to fairyland.