At the Higgins residence, the professor has started Eliza on a harsh, excruciating regimen of pronunciation exercises ("making her say the alphabet over and over") for her language education until "she does it properly, of course." A metal diaphragm has been tightly fitted around her lungs - as she pronounces vowels in a repetitive drill, a rotating drum charts her pronunciations on paper.

Thinking that there's an opportunity to extort or blackmail Professor Higgins for keeping his daughter (possibly for a scandalous sexual liaison), Alfred visits with Higgins "to rescue her from worse than death." Pickering defends his professor friend: "Mr. Higgins' intentions are entirely honorable." Both Higgins and Pickering are revolted by Doolittle's mercenary heart:

Higgins: Do you mean to say you'd sell your daughter for 50 pounds?
Pickering: Have you no morals, man?
Doolittle: No, no. Can't afford them, governor. Neither could you if you was as poor as me.

Alfred persuasively defends his avowed "undeservin'" nature and successfully makes a request for a five pound note as a pay-off:

I ain't pretendin' to be deservin'. No, I'm undeservin'. And I mean to go on bein' undeservin'. I like it, and that's the truth. But will you take advantage of a man's nature to do him out of the price of his own daughter what he's brought up, fed and clothed by the sweat of his brow, until she's growed big enough to be interestin' to you two gentlemen? Well, is five pounds unreasonable?

As he leaves with his five pound note, he hardly recognizes his cleaned-up daughter who scowls at Higgins: "I won't say those ruddy vowels one more time." Alfred advises Higgins to keep his daughter in line with physical force: "If you have any trouble with her, governor, give her a few licks of the strap. That's the way to improve her mind." Amused that Doolittle is a "philosophical genius," Higgins instructs Mrs. Pearce to write to an American philanthropist/millionaire (Mr. Ezra D. Wallingford), a wealthy man who founds moral reform societies, that Mr. Alfred P. Doolittle is a prospective lecturer - "one of the most original moralists in England."

The professor intimidates his pupil with behavioral techniques and threatens her with starvation: "Eliza, I promise you you'll say your vowels correctly before this day is out or there'll be no lunch, no dinner, and no chocolates." Spiteful and hateful toward her teacher, Eliza sings: "Just You Wait", a fantasy about her asking the King on Eliza Doolittle Day for Henry Higgins' head (and execution):

Just you wait Henry Higgins, just you wait! You'll be sorry, but your tears'll be too late!
You'll be broke and I'll have money. Will I help you? Don't be funny.
Just you wait, Henry Higgins, just you wait!...

Then they'll march you, Henry Higgins to the wall
And the King will tell me: 'Liza, sound the call.'
As they raise their rifles higher, I'll shout 'Ready! Aim! Fire!'
Oh-ho-ho, Henry Higgins, Down you'll go, Henry Higgins.
Just you wait!

Some time later, in his laboratory with walls adorned with a chart of mouth positions and side-view pictures of his subject, Higgins delivers elocution training to Eliza and laboriously forces her to repeat from a book the immortal words:

The rain in Spain stays mainly in the plain.

Intimidating her during the grueling training, he tells her that she is offending the Lord's ears with her thick, shrill accent. With one mechanical apparatus, he is able to demonstrate the force of her h's. When pronounced correctly, a gas flame wavers - when her h's are dropped, the flame remains stationary. She has the "peculiar habit of not only dropping a letter like the letter 'h' but using it where it doesn't belong, like 'hever' instead of 'ever', and she says 'cup o' tea' instead of 'cup of tea.' He even tortures her to read back a line from a poem: "With blackest moss, the flower pots were thickly crusted one and all" with six marbles inserted in her mouth.

When everyone is thoroughly exhausted late one night, he makes an effort to encourage her to rid herself of her ghastly accent:

Think what you're trying to accomplish. Just think what you're dealing with. The majesty and grandeur of the English language. It's the greatest possession we have. The noblest thoughts that ever flowed through the hearts of men are contained in its extraordinary, imaginative, and musical mixtures of sounds. And that's what you've set yourself out to conquer Eliza, and conquer it you will.

Finally, she makes a linguistic breakthrough with a perfectly pronounced, impeccably enunciated: "The Rain in Spain Stays Mainly in the Plain" without the accustomed ugly accent. Elated, Higgins can hardly believe what he has heard: "I think she's got it. I think she's got it." They sing a duet together, delighted about her triumph in the musical's biggest show-stopper:

Eliza: The rain in Spain stays mainly in the plain.
Higgins: I think she's got it. I think she's got it.
Eliza: The rain in Spain stays mainly in the plain.
Higgins: By George, she's got it. By George, she's got it. Now once again, where does it rain?
Eliza: On the plain! On the plain!
Higgins: And where's that soggy plain?
Eliza: In Spain! In Spain!
Chorus: The rain in Spain stays mainly in the plain!...

Higgins joyfully dances with her around the room. Reveling in her verbal achievement, Higgins proposes: "I think the time has come to try her out...Let's test her in public and see how she fares...I know, we'll take her to the races...My mother's box at Ascot." And the next morning, they will have to go out and buy her a dress that is not "too flowery" but "simple and modest and elegant." Now completely exhilarated, jubilant and starting to fall in love, Eliza cannot go to bed: "My head's too light to try to set it down. Sleep, sleep, I couldn't sleep tonight, not for all the jewels in the crown." Before finally collapsing on her pillow, she sings "I Could Have Danced All Night":

I could have danced all night, I could have danced all night,
And still have begged for more. I could have spread my wings
And done a thousand things I've never done before.
I'll never know what made it so exciting, Why all at once my heart took flight.
I only know when he began to dance with me I could have danced, danced, danced all night!

In the next stunning and stylized scene at the Ascot Race Track on Opening Day, the elegantly-dressed ladies and gentlemen of the polite, cultured and leisure high society class are clothed in black, white, and grey colors. [The striking sets and Edwardian-era costumes were designed by Oscar-winning Cecil Beaton.] The aristocrats complacently parade about in their extravagant costumes with their parasol-twirling ladies, as they stiffly wait for the start of the horse races. In uniform fashion, they raise their field glasses toward the track, and watch in freeze-frame as the horses gallop by during the first race. Afterwards, they unemotionally lower their field glasses and intone together, anti-climactically:

What a frenzied moment that was! Didn't they maintain an exhausting pace?
'Twas a thrilling, absolutely chilling running of the Ascot op'ning race.

Higgins appears, awkwardly set apart in a brown tweed suit. His ascerbic mother Mrs. Higgins (Dame Gladys Cooper) greets him with one of the film's most famous lines. [She upbraids her son about his own upper-class social lapses, paralleling his own corrections of lower-class pupil Eliza]:

Henry! What a disagreeable surprise!..You'll offend all my friends. The moment they meet you, I'll never see them again. Besides, you're not even dressed for Ascot.

He explains that he has invited "a flower girl" to her race box "to try her out first" before debuting her at the Embassy Ball:

I taught her how to speak properly. She has strict instructions as to her behavior. She's to keep to two subjects: the weather and everybody's health. 'Fine day' and 'how do you do?' And not just let herself go on things in general.

As Mrs. Eynsford-Hill and her son Freddy join Mrs. Higgins in her box, Eliza makes her spectacular entrance with Pickering, dressed in a white gown and hat with an accent or splash of red. She first speaks quite carefully with impeccable enunciation: "How kind of you to let me come." Freddy is immediately infatuated with Eliza, repeating back to her: "How do you do?" The transformed commoner also speaks about the weather using her pronunciation drills: "The rain in Spain stays mainly in the plain. But in Hartford, Hereford and Hampshire, hurricanes hardly ever happen." But then with marvelous inconsistency, Eliza begins to divulge less than genteel details about her aunt's death with her properly-trained accent. Higgins winces and gasps in astonishment at her street-sounding grammar, vocabulary, and conversational content, when she describes how her aunt was murdered by relatives for her straw hat:

My aunt died of influenza - so they said, but it's my belief they done the old woman in...Yes, Lord love you. Why should she die of influenza when she come through diptheria right enough the year before? Fairly blue with it, she was. They all thought she was dead, but my father, he kept ladling gin down her throat...Then she come to so sudden she bit the bowl off the spoon...Now what call would a woman with that strength in her have to die of influenza? And what become of her new straw hat that should have come to me? Somebody pinched it, and what I say is, them as pinched it done her in...Them she lived with would have killed her for a hat pin, let alone a hat...Gin was mother's milk to her. Besides, he'd poured so much down his own throat, he knew the good of it...Drank! My word! Something chronic!

Freddy calls her colorful speech patterns "the new small talk" and is captivated by Eliza. During the second race, Eliza's masquerade as a lady nearly fails when she excitedly shouts out as the horses pass:

Come on, Dover. Move yer bloomin' arse!

Henry's mother thinks that his protege is "ready for a canal barge" rather than the Embassy Ball, but Henry is persistent about continuing to refine her:

Mrs. Higgins: If you cannot see how impossible this whole project is then you must be absolutely potty about her. I advise you to give it up now and not put yourself and this poor girl through any more.
Henry: Give it up? Why, it's the most fascinating venture I've ever undertaken. Pickering and I are at it from morning till night. It fills our whole lives, teaching Eliza, talking to Eliza, listening to Eliza, dressing Eliza.
Mrs. Higgins: What? You're a pretty pair of babies, playing with your live doll.

Although Eliza has blundered her way through the entire day and embarrassed her mentors, young Freddy has become devoted to her. He has brought a bouquet of yellow flowers for Eliza, and stands outside the Higgins household - there, he sings of his love for her in "On the Street Where You Live":

I have often walked down this street before but the pavement always stayed beneath my feet before.
All at once, am I, several stories high. Knowing I'm on the street where you live.
Are there lilac trees in the heart of town? Can you hear a lark in any other part of town?
Does enchantment pour out of every door? No, it's just on the street where you live...
People stop and stare, they don't bother me for there's nowhere else on Earth that I would rather be.
Let the time go by, I won't care if I can be here on the street where you live.

Mrs. Pearce turns Freddy away from seeing Eliza, explaining that she "doesn't want to see anyone ever again" because of her shaky and "unbelievable" coming-out at the racetrack. Pickering is ready to give up on their "experiment," training, and bet regarding a very downcast Eliza: "It's inhuman to continue. Do you realize what you've got to try and teach this poor girl within six weeks? You've got to teach her to walk, talk, address a Duke, a Lord, a Bishop, an ambassador. It's absolutely imposs-. Higgins - I'm trying to tell you that I want to call off the bet."

In a quick jump-cut to six weeks later, Pickering is still warning Higgins of potential mishaps and embarrassments even though Eliza has been rigorously trained. They are nervously speaking to each other and pacing anxiously in the upstairs hallway, on the evening of the high-society Ball: "The way you've driven the girl in the last six weeks has exceeded all bounds of common decency...Are you so sure this girl will retain everything you've hammered into her?" Higgins argues that he has concerns for his "experiment" even though he has tyrannized her:

Of course she matters. What do you think I've been doing all these months? What could possibly matter more than to take a human being and change her into a different human being by creating a new speech for her? It's filling up the deepest gap that separates class from class and soul from soul. Oh, she matters immensely.

At that moment, Eliza appears at the top of the stairs - a fairy-tale vision in her gorgeous white evening gown, looking like a princess. Higgins is stunned by the view, and downs a drink of port, as Pickering helps Eliza into her red cape. Higgins then catches himself striding toward the door without Eliza, and turns back toward her. He extends his arm to her, and begins to escort her to the Ball.