The scene opens on the green and fertile tobacco fields and rolling, wooded hills of fictional, yet familiar, Missitucky U.S.A., latter half of the 1940s. We are at the town meetin’ place, a little green space featuring a wishing well and an old tree. The scene is a peaceful spring morning with only the harmonica of Sunny the sharecropper to disturb the air, but soon Buzz Collins and the Sheriff enter, pinning up a notice that this particular bit of Rainbow Valley is to be auctioned off in payment of back taxes, and try to proceed with the auction straightaway. Sharecroppers assemble and protest that this is only a trick of Senator Billboard Rawkins to get their land. Susan Mahoney (the Silent) enters, and with the boy Henry translating, tells them to wait for the auction, because her brother Woody is on his way with the money. Joyful and defiant, the sharecroppers chase Buzz and the Sheriff off the stage (“This Time of the Year”).
Finian and Sharon enter. They have traveled all the way from Ireland, and finally reached the end of their journey. Exhausted and homesick, Sharon insists upon sitting down, even when Finian says that their destination is still “the hill beyond yon hill.” Finian tries to reassure his daughter that she will love America, and in turn Sharon sings to him of home (“How Are Things in Glocca Morra”), hoping to provoke some sentimentality. Finian explains to her why they have come to Rainbow Valley - by the McLonergan Theory of Economics, if he buries gold in the soil here in close proximity to Fort Knox, the gold will multiply and he will become a multi-millionaire. Sharon is aghast to learn that her father has a crock of gold; thinking that he must have stolen it, she refuses to believe that he is merely borrowing it from a leprechaun.
At this moment, they are startled into the tree by the noise of the crowd, and from their perch they watch Buzz, Sheriff, Susan, and the sharecroppers re-enter with Woody Mahoney, the returning hero.