In 1925 Tucson, cowboys and ranch dwellers sing the praises of Arizona’s wide-open landscape, a home for dreamers and strivers. And it seems half of them are in love with the gorgeous Hungarian Lona Farrell, whose father emigrated to the United States from Vienna, caught up in gold rush fever. She now runs his Sunshine Ranch, and staggers under the weight of the gambling debts he left. She fires her foreman and best rider, Jim Slaughter, for having tried to force himself on her - but this leaves her with no one to ride her prize filly, Arizona Lady, at the upcoming Tucson rodeo. She needs to win that race to save her ranch. She hires a newcomer from Colorado, Roy Dexter, to ride for her, despite the concerns of Sheriff Harry Sullivan about a rumored horse thief in the area (and despite his jealous reaction to the clear attraction between Lona and Roy). Lona insists the hire is all business, and she makes Roy promise to keep it that way.
Meanwhile, local girl Nellie Nettleton has returned to Tucson from Chicago, where she’s been trying to break into the theater. A rich city kid, Chester Kingsbury, has followed her, smitten, but she has no time for romance. Her unmarried sister in Kentucky has a baby on the way and has asked Nelly for help, believing her to be a successful actress. Nelly has no money to help her sister, so she’s come to the rodeo with everything she has to bet on Arizona Lady.
As preparations continue for the rodeo, we meet yet another suitor of Lona’s, the wealthy neighboring rancher Lopez Ibañez. He has hired Jim Slaughter, who will now face Roy Dexter in the big race. He mentions to Lona the possibility of buying her ranch should he win, and the two clearly enjoy sparring with each other.
The rodeo begins in huge excitement. Roy is confident, and so is Lona. Right before the race begins, the lovesick Sheriff makes a surprising confession to her: he has made a huge bet on Ibañez’ horse, because he doesn’t trust Roy. In the playful argument that follows, he makes a serious proposition. If his horse wins, Lona’s loses, and she loses the ranch - but rather than buy it from her, the Sheriff suggests that Lona marry him. Lona laughs off the possibility of her horse - or her Roy - losing the race, and agrees to the bet. But shockingly, Roy does lose, thrown from the horse. He accuses Slaughter of tampering with his saddle, and the mood turns against the Colorado newcomer. Lona steps to his defense, and he declares that he will stay at the Sunshine Ranch, and ride Arizona Lady in the upcoming Kentucky Derby despite this setback. But the Sheriff steps forward to collect on his promise, and an overwhelmed Lona agrees to marry him in front of the assembled townspeople - and a heartbroken Roy.
At the finest hotel in Tucson, the engagement party for Lona and Sheriff Sullivan is in full swing. Jim Slaughter lets the men know that the guest entertainer at the hotel, the dancer Bonita, can identify Roy as the mysterious horse thief. As a group of them go to find her, Lopez Ibañez stays behind to warn Lona, but Roy arrives and she run off to find him. Meanwhile, Chester and Nelly celebrate her huge winnings at the rodeo (thanks to Chester, who bet on every horse), and confess their love for each other. Eager to be alone together, they encounter Roy. Nelly gives him the money to take to Kentucky, but in her excitement she doesn’t explain exactly why.
Before Roy can ask, Nelly and Chester are gone, and Lona arrives. The tension between the two turns first combative, then passionate. They are embracing when the Sheriff returns with Bonita, and he is only too happy to present the woman who identifies Roy as the horse thief - and her former lover. He denies the former, but the cowboys find Nelly’s cash on him, and then the news arrives that Arizona Lady has been stolen. Roy is taken to jail, and an embarrassed Lona throws herself back into the party, determined to dance and drink away her pain. Unnoticed by everyone, Lopez Ibañez sneaks away.
In jail, Roy finds out that his cellmate, the eccentric and drunken wanderer Benchley, knows Jim Slaughter and Bonita - back in Colorado! Roy realizes that Slaughter is the horse thief and, with Benchley’s help, escapes. He returns to the party and convinces the cowboys to find Slaughter, while he tells Lona and the Sheriff what brought him to Arizona: ever since horse thieves killed his father in Colorado, he’s been on their trail. He was close to finding them when he came to the Sunshine Ranch, but Lona had made him forget. At this sad story, Bonita bursts into tears and admits that she had lied about Roy to get back at him for leaving her. The Sheriff is ready to believe everything, when Ibañez (who had noticed Slaughter’s absence and become suspicious) and the cowboys enter with Slaughter in tow. And so everything is resolved - except for the frayed feelings between Lona and Roy. Both of them, hurt by each other’s distrust, are unready to forgive, and they agree to part after the Derby.
At the big race, it’s the Sheriff who has a change of heart. He makes another joking bet with Lona: this time, if Arizona Lady wins, there will be an immediate wedding, right there at the Derby. But little does everyone know, the Sheriff still has one last trick up his sleeve!