Based on Laszlo's play, employees in a shop who clash realize they have been writing romantic letters to each other anonymously.
In Budapest employees of Hugo Matuschek (Frank Morgan) ask Alfred Kralik (James Stewart) about his dinner with the boss. Alfred tells Pirovitch (Felix Bressart) he answered a personal ad and has exchanged four letters. Alfred advises Matuschek not to buy a musical cigarette box. Klara Novak (Margaret Sullavan) comes in for a job, and Alfred discourages her. Matuschek says no, but she gives Alfred her phone number. Klara sells a music box and is hired. Alfred argues with Klara. Alfred tells Pirovitch he is meeting his pen pal that night. Alfred complains that Matuschek is picking on him. Klara thanks Alfred and asks him for the evening off for her date. He gets angry, and she says she does not like him. Alfred asks Matuschek for the evening off. They quarrel, and Matuschek accepts Alfred's resignation, giving him a month's pay and a reference letter, which Alfred reads aloud to the others. Alfred says good-bye. Matuschek learns from a detective (Charles Halton) that his wife is having an affair with Ferencz Vadas (Joseph Schildkraut). Pepi Katona (William Tracy) stops Matuschek from committing suicide.
Alfred takes Pirovitch, who describes his pen pal and says it is Klara. Alfred comes back without his carnation. Klara denigrates him, and they quarrel. Alfred visits Matuschek in the hospital. Matuschek tells Alfred he was jealous of him but now asks him to be manager and fire Vadas. Errand boy Pepi gets Matuschek to make him a clerk. Alfred tells Vadas he does not like him and fires him. Disappointed Klara finds Alfred is manager and faints. Alfred calls on ailing Klara, who gets a letter and cheers up. Alfred suggests she give her friend a wallet instead of a music box. On Christmas Eve Alfred tells the employees to sell for Matuschek, who sees active business and thanks them, giving out bonuses. Matuschek invites the new errand boy Rudy (Charles Smith) to dinner. Alfred shows Klara a necklace. She tells Alfred she was attracted to him but was mixed up. He tells her she will be engaged and describes her pen pal as fat and unemployed. Suddenly Klara realizes Alfred is her pen pal. She is confused and apologizes. After she checks his legs, they kiss.
Director Ernst Lubitsch shows his deft touch in this
brilliant comedy that plays on the irony between Klara's romantic
conception in her mind from letters and the real man she criticizes
in comparison, only to discover they are one and the same person.
The humble life in a Budapest shop is contrasted to the current
war that is raging in Europe.