After the clambake, everyone rests in languorous contentment (“A Real Nice Clambake”). Before the boys can begin their customary treasure hunt, Nettie suggests they clean up while Enoch hides the treasure. Jigger and Billy, with knife in tow, plot their move to the waterfront, where Mr. Bascombe will be transporting his cash payment.

Jigger is distracted by his desire for Carrie, despite Billy’s insistence that there’s no time for girls. When Carrie comes over, Jigger sits her down and throws his arms around her, begging for a kiss. Before she can leave, he apologizes for letting his “brute” come out, adding that he worries about her innocence. Confidently, she demonstrates how to protect herself with a few simple defenses. Jigger moves his hand down her back, patting her bustle and lifting her above his shoulders just as Enoch appears. Angrily, Enoch says he would never marry a woman so free and loose. Left with his shattered dreams, Enoch sings about all that might have been (“Geraniums in the Winder”).

As Jigger comforts a distraught Carrie, he remarks on the tragedy that befalls women who fall in love with virtuous men. Carrie tries smoothing things over with Enoch as Nettie starts the treasure hunt. Julie wonders why Jigger and Billy, neither of whom knows the island well, would team up together. Billy fiercely brushes her off and leaves with Jigger anyway (“Stonecutters Cut It on Stone”). Agreeing with Jigger, Julie and the girls comfort Carrie. Julie sees Billy and Jigger again and, feeling the knife hidden on Billy’s chest, fears the worst. Billy shoves her away and runs off with Jigger, leaving Julie to ponder her situation (“What’s the Use of Wond’rin’?”).

At the loading dock, while the rest of the town hunts for a hidden treasure, Billy and Jigger wait for Mr. Boscombe to walk by with the cash. Billy asks Jigger if he ever thinks about being judged by God. Jigger isn’t convinced folks of their kind will ever see God or angels or hear music in the next life – such things are only for the rich. To pass the time while waiting, they play cards; first for pocket change, but then on loan from what they’re about to steal. Tensions escalate just as Mr. Bascombe walks by. Billy approaches him and asks for the time while Jigger attempts to stab him from behind. Mr. Bascombe gets hold of Jigger’s knife hand and pulls a gun on them. He calls for assistance from the nearby ship as Jigger escapes. Two policemen appear and Billy, refusing to go to prison, stabs himself in the stomach. The police lay him out, still breathing, and call for a doctor.

On their way home from the clambake, Nettie and the others come across the waterfront scene. Julie rushes to Billy and holds him. He explains that he was trying to make enough money for them to move to San Francisco with their child. Comforting him in his last moments, Julie holds Billy tight and says goodbye. Nettie encourages Julie to keep on living; she can stay with Nettie, who will help raise the baby (“You’ll Never Walk Alone”).

Two Heavenly Friends come to greet Billy. They tell him that, though he is dead, it’s not over as long as there’s one person on earth who remembers him. They’ve come to take Billy up to the judge, not the Lord God Himself. In a fit of rage, Billy refuses to accept that Jigger was right; that there’s no supreme court for people like him (“The Highest Judge Of All”).

Billy meets the Starkeeper, who is hanging and dusting off stars from a stepladder in the backyard of heaven. Taking notes, the Starkeeper asks Billy if there’s anything he left unfinished on earth; he is entitled to go back for one day, but only if he wishes to. The Starkeeper asks why Billy would leave his wife with a baby on the way and nothing to live on, but Billy remains unapologetic. The Starkeeper explains that Billy hasn’t done enough good to deserve a place in heaven yet, but he could still make it if he tries hard enough. He suggests that Billy return to earth for a day to do some good for his daughter, who is now 15 years old.

The Starkeeper shows Billy a scene on earth: Billy’s daughter Louise is on the beach with Carrie and Enoch’s daughter, who calls Louise’s father a poor thief who beat his wife. After violently lashing out at the girl, Louise has a lingering flirtation with a carnival boy, but he leaves her heartbroken, angry and weeping alone, with no one to console her (“Ballet”).

Billy decides to visit earth after all. He finds Julie outside her cottage catching up with Carrie, who’s just returned from a trip to New York City. They are all on their way to Louise and Enoch Junior’s graduation. Billy watches as Louise reveals her plan to run away and become an actress. Enoch Junior, worried about this plan, offers to marry her despite the inevitable difficulty of convincing his father to let him marry so far beneath his station. Louise forcibly rejects the offer and, as Enoch Junior leaves, Billy puts his foot out to trip him.

Billy is reminded by his heavenly escort that Louise can only see Billy if he wants her to. Revealing himself to Louise, Billy says he knew her father and that nothing her peers have said of him is true, but she knows it is; they’ve been reminding her of it her whole life. Billy tries to give Louise a star, but she turns away, suspicious of him, and starts to go inside. Growing panicked, he takes her arm, trying to explain, and as she struggles out of his grip, he slaps her hand. She screams and runs inside, bringing Julie back out front. Julie sees Billy for a brief moment before he hides himself again. Louise is bewildered, but Julie seems to understand what has happened. Julie, alone, sees the star Billy left for Louise. Billy watches her, calling to her (“If I Loved You” Reprise). Determined to make it right, with little time remaining, he asks the Heavenly Friend to let him watch Louise graduate.

At the graduation ceremony for Enoch Junior and Louise, the principal announces the next speaker, Doctor Seldon, who reminds Billy of the Starkeeper. Standing behind Louise, Billy recites the doctor’s wise and inspiring speech, telling Louise to listen and believe him. As the speech continues, the crowd joins in and Billy, standing behind Julie, tells her he loved her. The Heavenly Friend calls for Billy; having professed his love, Billy must leave earth once again (“Finale Ultimo”).