Five years after her mother's death, young hotelier Sophie Sheridan prepares for the grand reopening of the Hotel Bella Donna on the Greek island of Kalokairi, seeking to honor her mother Donna's legacy. The hotel's relaunch is complicated by relationship troubles with her partner Sky, who is in New York, and the unexpected absence of two of her three possible fathers, Harry and Bill. Sophie's doubts and struggles are compounded as she learns more about her mother's past, paralleling her own challenges with those Donna faced as a young woman.

In flashback sequences, a young Donna graduates from Oxford and spontaneously decides to travel through Europe. Arriving on the idyllic Greek island, she decides to stay and makes friends: the spunky writer Rosie and the wealthy Tanya. Donna then meets three young men consecutively—charming sailor Bill, inhibited banker Harry, and free-spirited artist Sam—any of whom might be Sophie's father. Each encounter is a step in Donna's journey towards independent adulthood against a backdrop of vibrant 1970s Europe, as she forges her path and sets the groundwork for the future her daughter will come to know.