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Miss Saigon is a 'modern' adaptation of Puccini's "Madame Butterfly." The setting is often said to be the Vietnam War, but in actuality the events center more on post-war Vietnam. The story takes place during 1975 and 1978, and as such the war is only referred to as a past event.

The show was inspired by a photograph inadvertently found by Schonberg in a magazine of a Vietnamese mother leaving her child at a departure gate at Tan Son Nhat Airport to board a plane for the United States of America where her father, an ex-GI, would be in a position to provide a much better life. Schonberg considered this mother's actions for her child to be "The Ultimate Sacrifice," an idea central to the plot of Miss Saigon.

The plot is based on this real-life episode, and tells the story of Chris an American GI who meets Kim, a beautiful, war orphan Vietnamese girl in a Saigon bar. The two end up falling in love despite their initial apprehension. Chris is eventually forced to return to the United States and during the next three years the two struggle to deal with the emotional aftermath of their affair.

Simultaneously the plot follows the adventures of Tran, Kim's boss (half Vietnamese and half French) who is referred to as the Engineer. Tran dreams of moving to the United States and living the American dream, but after the war ends his ambitions are crushed under Vietnam's new Communist government.