The action takes place in 1848 in the Shenadoah Valley. A traveling troupe of entertainers is welcomed by the villages. Dr Parnassus, the head of the troupe and "miracle worker" offers his magic Panacea to the crowd while introducing Madame Tarot, the fortune-teller, the beautiful Blind Louisa who will sing for them, and the clown, Moby, the evening's entertainment. When the crowd had disbursed, Moby and Louisa are left alone. Moby awakens the innocent girl emotionally; but when he is unable to respond to her advances, she becomes hysterical, bringing Dr Parnassus and Madame Tarot in response to her cries.

Parnassus, Louisa's overprotective father, violently threatens the clown, who runs off, laughing. Moby has run into the woods, humiliated and emotionally unstable. He begins to act as a child, dancing and splashing the water in a nearby pool - when he suddenly sees himself in the pool with his makeup washed away, he stabs his reflection with his knife.

The band plays Parnassus' cue for the evening show. As he begins, the crowd becomes angry that the clown is not on stage. Parnassus introduces Louisa, who refuses to sing. At the moment the crowd is about to turn on him, Moby enters, his costume ripped and bloody. He tries to perform his pantomime - turning the knife into magic flowers which he puts into Louisa's hands - then he falls dead. Louisa finds his body, and tells him that she sees colors - she sees all his lights - she sees.