It is Christmas Eve in 1987. Mark Cohen, an aspiring filmmaker and the show’s narrator, is setting up his camera in his sparse East Village loft apartment. He turns his camera on his roommate Roger Davis, a former junkie and songwriter and trying (unsuccessfully) to write a new song ("Tune Up #1"). Mark’s mother calls; they screen the call, and she leaves a message saying how sorry she is to hear about Mark’s ex-girlfriend Maureen Johnson, who left him for a woman ("Voicemail #1"). In the meantime, the pair’s friend Tom Collins, a gay college professor and activist, is coming to visit them, but as he stands downstairs at a payphone to let them know he has arrives, he is violently mugged. Another call comes in, this time from Benjamin "Benny" Coffin III; a former friend and roommate, Benny married into a wealthy family and moved out, but now owns the apartment building in which the pair lives. He also owns the lot next door, from which he plans to evict a group of homeless squatters and build a Cyber Studio in its place. He tells them that they are behind on their rent, and that they still owe him for the last year ("Tune Up #2"). The power goes out, and the pair questions how—or if—they will ever pay their “Rent.” The phone rings yet again—it is Maureen, begging Mark for help setting up the equipment for a protest she is staging in the homeless lot next door later that night.
Angel Dumott Schunard, a drag queen and street musician, finds a bloody and bruised Collins on the street and helps to clean him up ("You Okay Honey?"). Both HIV-positive and immediately attracted to one another, they head out for a night on the town.
Mark decides to go see what’s taking Collins so long. He invites Roger to come out with him, but he declines. It is revealed that Roger hardly leaves the apartment ever since his girlfriend April committed suicide upon learning that they both had AIDS. Mark reminds Roger to