It is evening in the library of Lady Britomart Undershaft's house in January 1906. Her son, Stephen enters. Britomart aggressively announces that as a grown man, Stephen must take charge of the family affairs. Lomax, his sister Sarah's fiancé, will not receive his trust fund for years. Barbara, the most promising member of the household, has joined the Salvation Army and taken up with a tempestuous Greek scholar, Adolphus Cusins. Britomart cannot avoid the topic any longer—they must speak of Stephen's father, the great military industrialist Andrew Undershaft.
Long ago, the foundling Undershaft, in the tradition of the Undershaft armory, disinherited Stephen to find a foundling as his successor. Britomart divorced him as a result. Now Britomart has invited Andrew to visit this evening to ask for money. Britomart summons the family to the library and inform them of her plans. Barbara is amused and expectant. After all, her father has a soul to be saved like everyone else.
Undershaft arrives. Failing to recognize Stephen, he greets Lomax and then Cusins as his son before realizing his error. Undershaft asks Barbara about her work at the Salvation Army. He notes that his firm could easily share the Army's motto: Blood and Fire. After some heated discussion, Barbara and Undershaft strike a bargain. Undershaft will visit Barbara's shelter and Barbara his factory, as each will attempt to convert the other to their cause.
It is a cold morning in the West Ham shelter of the Salvation Army. Two diners at the lunch table speak animatedly. The sly, young Snobby Price and hard- worn, middle-aged Rummy Mitchens joke about life at the shelter. Suddenly Bill Walker, a rough young man, appears and assaults Jenny Hill, a young Salvation worker. Apparently Bill has come to reclaim a girlfriend of his who recently converted. Rummy runs to Jenny's aid, and Bill cracks her across the face.
Barbara enters briskly. She berates Bill under he is near-tears. She asks how he could have struck a girl. When he announces that he wants his girl, Barbara informs him that she has joined the Army post in Canningtown and taken up with one of her own converts. Bill is crushed. Undershaft arrives and sits to watch his daughter's work. Barbara continues her campaign for Bill's soul. Just as Bill is about to break down, a drum is heard in the shelter, and Cusins enters. Bill departs for Canningtown.
Barbara returns to her work, leaving Cusins to explain the shelter to her father. Presenting himself as a "collector of religions," Cusins asks into Undershaft's faith. Undershaft believes that two things are necessary to salvation: Money and Gunpowder. Love, truth, and mercy are the graces of a "rich, strong, and safe life." Undershaft insists that they together must convert Barbara to his cause. Undershaft plans to demonstrate his power over the Army in his effort to win Barbara over.
The denizens of the shelter return. Barbara laments the Army's poverty. Bill returns from his excursion defeated, and Jenny expresses her sympathy. Bill refuses her forgiveness and offers to pay her to square their debt. Barbara forbids Jenny from even taking his money for the Army.
Mrs. Baines, an Army Commissioner, then enters and announces a miracle. The Lord Saxmundham has promised the Army five thousand pounds if five other gentleman will give one thousand each to make it ten. To Barbara's dismay, Undershaft promises to help them meet Saxmundham's condition. Gladly Baines takes her father's blood money. "Wot prawce selvytion nah?" scoffs Bill in an aside to Barbara.
Overtaken by this "ecstasy of mischief," Cusins cheers Undershaft. The group makes ready for a triumphant procession through the streets. Barbara refuses to join them, pinning her silver "S" brooch on her father's collar.
The next day the family appears preparing for their visit to Undershaft's cannon works. Barbara has shed her Army uniform. Undershaft then enters and before he has time to breathe, Britomart raises the topic of Stephen's inheritance. Undershaft protests that tradition demands Stephen's dispossession. The firm needs a man without relations or education, a man who would be out of the running if he were not strong. If Britomart wants the foundry in the family, she should find a foundling to marry Barbara.
The group moves to Perivale St. Andrews, a beautiful "smokeless town of white walls" lying between two Middlesex hills. Cusins reports that everything in the city is perfect: the town hall, libraries, insurance fund, pension fund, and onward. Lady Britomart arrives from town and chastises Andrew for keeping the foundry to himself all these years. Adolphus must inherit the business.
Undershaft reminds her that Cusins is no foundling. Cusins then makes a shocking confession, that he has lied about his birth. His parents' marriage is only legal in Australia, his mother being his father's deceased wife's sister.
Undershaft accepts Cusins but insists that he commit himself to the true faith of the Armorer, which is to give arms to all men who offer him an honest price, nationality, faith, and cause notwithstanding. Cusins refuses and dismisses his "morality mongering," while Undershaft asks Barbara to tell Cusins what power really means. Barbara confesses that up until yesterday she believed herself in the power of God, but her father revealed that she was in the power of Bodger and Undershaft.
Undershaft urges her to scrap a morality and religion that no longer fit the facts as she would with old machinery. He has redeemed his people's—and family's—souls by providing for them. He has saved them from the worst of crimes: the "crime of poverty." Work, food, shelter, and clothing save—not the Bible. One should not preach at poverty but kill it. Only violence inaugurates the new. The history of the world is the history of those who courageously embrace this truth. Cusins agrees to Undershaft's terms.
The group leaves Barbara and Cusins alone. Cusins does not regret the sale of his soul as he has sold it "for reality and for power." He wants to "make power for the world," to provide a power "simple enough for common men to use yet strong enough to force the intellectual oligarchy to use its genius for the general good." Barbara pledges to stay with Cusins. Now sees the souls saved by her father's community and will return to the Army reborn with her new knowledge. "Major Barbara will die with the colors," she cries. The two embrace. Barbara runs to the shed and calls in childlike joy: "Mamma! Mamma! I want Mamma!"