The play begins with a historian giving a brief overview of medieval England. An idyllic Scandinavian village appears, with gaily dressed Finnish villagers singing and dancing to the "Fisch Schlapping Song." The Historian returns, irritated, and tells them he said "England", not Finland. The villagers disperse and the pastoral forest is immediately replaced by a dreary, dark village with penitent monks in hooded robes chanting Latin prayers and hitting themselves in the face with wooden boards. King Arthur travels the land with his servant Patsy ("King Arthur's Song"), trying to recruit Knights of the Round Table to join him in Camelot and his quest for the Holy Grail. He encounters various strange people, including a pair of sentries who are more interested in debating whether two swallows could successfully carry a coconut than in guarding their castles. Sir Robin and Sir Lancelot meet as they attempt to dispose of the sickly Not Dead Fred ("He Is Not Dead Yet"). They agree to become Knights of the Round Table together.

Meanwhile, Arthur attempts to convince a peasant named Dennis Galahad that he (Arthur) is king of England because the Lady of the Lake gave him Excalibur, the sword given only to the man fit to rule England. However, Dennis and his mother, Mrs. Galahad, are political radicals and deny that any king who has not been elected by the people has any legitimate right to rule over them. To settle the issue, Arthur has the Lady of the Lake and her Laker Girls appear to turn Dennis into a knight ("Come With Me"). Cheered on by the girls ("Laker Girls Cheer"), the Lady of the Lake turns Dennis into Sir Galahad and together, they sing a generic Broadway love song ("The Song That Goes Like This"). Together, with Sir Bedevere and Sir Not-Appearing-In-This-Show (a knight resembling Don Quixote who promptly apologizes and then leaves), they make up the Knights of the Round Table ("All for One").