When Lady Lou walks down the row of jail cells on her way to visit ex-boyfriend Chick, all the prisoners know her, as she jokes: "Hey, what is this? Old Home Week?" Chick complains and threatens that if Lou double-crosses and two-times him before he gets out of jail, he will kill her:

You've been double-crossing me, you're gonna pay for it. Every day every minute of this stretch, you're gonna pay for it.

She warms up to him and promises: "If I can wait a year, you can wait a year...Why, that ain't nothin' when you got will power like me...Don't worry. I'll be true to ya."

When the city mission next door to the bar is about to close for not paying rent, Lou buys the Mission building for $12,000, offering her large diamond bracelet as payment. But she wants the papers to be drawn up to "make it appear like the mission bought the building themselves."

Later, Lady Lou performs "Easy Rider" on stage, about a jockey rider that she bets on. Dan Flynn (David Landau), a competitor to Gus Jordan, has intentions to become head of the saloon after Gus is displaced, so that he can also possess Lady Lou:

Lou: Are ya thinkin' about movin' in?
Dan: Yeah, I thought I might.
Lou: When?
Dan: Oh, when Gus moves out.
Lou: Flynn, you're an optimist...

Privately, Lou is tipped off by Flynn that Gus is "in the hole," because his illegal operations have been found out by a slick undercover agent ("dick") named "The Hawk" ("the slickest bird in the business"): "He's been tipped off to Gus and he's got the goods on him." And as a kept woman, Lady Lou is threatened with being implicated in Gus's crimes:

Dan: If Gus goes up the river, you'll go along with him. I'm tippin' ya off private.
Lou: What are ya tryin' to do, scare me, Dan? Well, when I need protection, I'll write ya a letter.

Lou is also informed by bodyguard Spider Kane (Dewey Robinson) that Chick, who misses her and his freedom, has escaped from jail. Captain Cummings also calls on Lady Lou in her upstairs quarters. He asks Lou how much she knows about Sally Glynn's whereabouts. Sally's father was at the mission when the young girl came next door to the bar, and he is now looking for her. Lou first reacts with jealousy: "So ya come to me to find another woman!" When told that Gus "and his friends" found a job for Sally, the Captain is relieved that Lou had nothing to do with their crimes: "Well, I'm glad to hear that...I'm anxious not to see you mixed up in it." He wonders: "I guess I'm takin' your time." She replies: "What do you suppose my time's for?" Lou invites him to sit down:

Lou: Sit down. (He complies.) That's it. Loosen up. Unbend. You'll feel better....
Captain: So all this is your famous collection, eh?
Lou: Ah, this is just my summer jewelry. You ought to see my winter stuff...You know it was a toss-up whether I go in for diamonds or sing in the choir. The choir lost.
Captain: Well, they're wonderful. They always seem so cold to me, they have no warmth, no soul. I'm sorry you think more of your diamonds than you do of your soul.
Lou: I'm sorry you think more of my soul than you do of my diamonds. Maybe I ain't got no soul.
Captain: Ah, yes, you have, but you keep it hidden under a mask. You'll wake up and find it sometime. Haven't you ever met a man who could make you happy?
Lou: Sure, lots of times.

As he leaves, she offers another invitation: "Come up again, anytime." After the Captain exits her door, Lou delivers a self-satisfied line to herself: "Well, it won't be long now."

Without real cash, Gus Jordan gives counterfeit money to Rita and Serge to spend, as Serge comments: "The only way to get rich is to make one's own money." Meanwhile, police arrive at the club to search for escaped con Chick, who has stealthily entered Lou's bedroom window and demands that the enticing Lou (in a low-cut gown and dripping in jewels) pack up and go with him after his difficult getaway ("me jumpin' freights and crawlin' through the mud to get to you"). But she refuses and orders him out. When he threatens to strangle her - although he can't carry through with it, she eventually promises to meet him later in the evening after her performance in the show.

Serge arrives at Lou's door and presents her with a gift of a diamond pin - Lou's true love rather than men. Downstairs, Rita is accused of some crime (possibly passing the phony counterfeit money or being part of a white slavery ring): "That's her!...She's the one that done it." Lou admires the diamonds given to her by Serge ("Diamonds is my career") just as Rita walks in on him pinning the diamond on Lou's bodice above her heaving breast, and planting a kiss on Lou's lips. Upset and furious, Rita demands the diamond pin back and in the struggle, Lou accidentally stabs Rita to death. She has her bodyguard dispose of Rita's body, while she takes to the stage to sing.

Later, a "funny-acting" Gus speaks to Lou about his worries over his own fate, due to Sally and her potential testimony against him: "I'm sorry I ever bothered with that girl." Gus is also jealous of Serge and her other male admirers, including the mission captain:

Gus: So you met a man who wouldn't fall for you, hey?
Lou: Who wants him to fall? Why, he'd be the kind a woman would have to marry to get rid of.

Gus Jordan is fearful that Flynn is poised to take over his business, and that the Hawk is "spottin' the place day and night," after Lou divulges that she has heard of evidence that is mounting against her boss/bar owner:

Gus, I hope you ain't been sendin' them girls to the Coast to become classy dips and burglars, like Flynn thinks.

In the film's conclusion, after Lou sings "Frankie and Johnny," Chick kills Flynn in the club, and the gunfire draws a police raid upon the establishment. Cummings reveals himself to Jordan as the undercover federal agent "The Hawk" with a badge, as he arrests Gus and Serge and sends them to jail to end their criminal operations and activities ("making and passing counterfeit money"). Lou snarls at the Hawk:

You! The Hawk! A nightbird workin' in the dark, stealin' the confidence of people, the lowest kind of a thief.

Thinking Lou has double-crossed and betrayed him, Chick threatens Lou with a gun but is also apprehended by the Hawk and his men during the confrontation. Not to leave her behind, the Hawk pulls out handcuffs for Lou to take her to jail.

Lou: Those absolutely necessary? You know I wasn't born with them.
The Hawk: No. A lot of men would have been safer if you had.
Lou: Oh, I don't know. Hands ain't everything. (He puts the handcuffs away) ...My wrap. (He places her fur wrap on her shoulders.) If you want to help me, pick up my train.

In the final scene, the Hawk takes Lou away to 'prison' in an open, horse-drawn carriage rather than in the police wagon, as she complains: "I think I'd have liked the wagon better." When he demands to hold her hand, she retorts: "I can hold it myself."

He notices all the glittering diamonds on her hand:

The Hawk: You know, you remind me of a glittering palace of ice.
Lou: I ain't ice.
The Hawk: I didn't say you were, but your diamonds are all going to the storehouse.
Lou: You said I had a soul - I looked for it but I didn't find it.
The Hawk: You will.
Lou: Where? In jail?
The Hawk: No, that's not the place for you.
Lou: Oh, you got me, ain't ya?
The Hawk: Yeah, I gotcha, you're my prisoner, and I'm gonna be your jailer for a long, long time.
Lou: Oh, yeah?
The Hawk: Yeah, and you can start doing that stretch right now.

He removes all her other rings and puts his own diamond ring on her finger, and then threatens 'jailing her' with a proposal. She notices the new rock on her marriage finger:

Lady Lou: Where'd you get that?...dark, and handsome.
Capt. Cummings: (scolding) You-Bad-Girl.
Lady Lou: (cooing) Mmm, you'll find out.

They embrace and kiss in the final fadeout to black.