In 1933, after leaving Dogville, Grace Margaret Mulligan sees a slave being punished at a cotton farm called Manderlay. Officially, slavery is illegal and Grace stands up against the farmers. She stays with some gangsters in Manderlay and tries to influence the situation. But when harvest time comes, Grace sees the social and economic reality of Manderlay.

Johan Falk hasn't been working for over a year since he resigned from the police. Most of all he wants to move out to the countryside, but fate has a different thought.

A mysterious woman named Grace hides in a small mountain town from criminals who pursue her. The town is two-faced and offers to harbor Grace as long as she can make it worth their effort, so Grace works hard under the employ of various townspeople to win their favor. Tensions flare, however, and Grace's status as a helpless outsider provokes vicious contempt and abuse from the citizens of Dogville.

Selma, a Czech immigrant on the verge of blindness, struggles to make ends meet for herself and her son, who has inherited the same genetic disorder and will suffer the same fate without an expensive operation. When life gets too difficult, Selma learns to cope through her love of musicals, escaping life's troubles - even if just for a moment - by dreaming up little numbers to the rhythmic beats of her surroundings.