We are introduced to Dr. Horrible who tells us through musical numbers about his plan for world domination, his arch nemesis; Captain Hammer and his long-time crush on the girl from the laundromat; Penny. Penny also happens to be falling for Captain Hammer after he 'saves her life.'
- Dr. Horrible is filming an entry for his video blog, giving updates on his schemes and responding to various emails from his viewers. Asked about the "her" that he often mentions, he launches into a song about Penny, the girl he likes from the laundromat ("My Freeze Ray").
The song is cut short by his "evil moisture buddy" Moist, who brings up a letter from Bad Horse, the leader of the Evil League of Evil. The letter informs Dr. Horrible that his application for entry into the League will be evaluated, and that they will be watching for his next heinous crime ("Bad Horse Chorus").
The following day, Horrible prepares to steal a case of wonderflonium for his time-stopping Freeze Ray by commandeering the courier van using a remote control device. Penny happens to be on the same street ("Caring Hands"), and appears asking him to sign a petition to turn a condemned city building into a homeless shelter. However, the remote requires his attention, and he appears uninterested in her and her cause. As Penny leaves, Horrible is conflicted, but opts to steal the wonderflonium, telling himself that 'A man's gotta do what a man's gotta do' ("A Man's Gotta Do").
When Horrible remotely drives the van away, Captain Hammer appears and takes over Horrible's song, smashing the remote control receiver and inadvertently causing the van to veer towards Penny. Hammer pushes her out of the way (into a pile of garbage) just as Horrible regains control of the van and stops it, making it appear that Captain Hammer stopped the van with his bare hands. The two confront each other, with Hammer slamming Horrible's head on the van's hood, but Penny emerges to thank Hammer, making him forget about beating up Dr. Horrible. As Hammer and Penny serenade each other, Horrible makes off with the wonderflonium.