Cigarette girl Marjory Stuart (Mary Martin) poses as an heiress in the hope of finding a wealthy husband. When her ship docks at a Caribbean island resort, Marjory drops a fake diamond bracelet overboard, intending to cash in on the ship's insurance. Pete Hamilton (Dick Powell), an American ne'er-do-well lounging nearby on his boat with his friend, Wally Case (Eddie Bracken), dives to retrieve the bracelet, however. After having the bracelet appraised, Pete learns that it is made of paste, and tells Marjory that he knows she is a phony.

Nightclub performer Bubbles Hennessy (Betty Hutton), who is aware of Marjory's ruse, has come to the island to find Wally, her fiancé, whom she is suing for breach of promise. Marjory confesses to Pete her husband-hunting scheme, and Pete decides to help her marry his former schoolmate, Alfred Monroe (Rudy Vallee), a multi-millionaire on vacation at the island. Wally, meanwhile, is shocked when Bubbles slaps him awake from an afternoon nap, but he soon plays on her emotions and cajoles her into paying his rent to his landlady, a voodoo priestess.

Pete and Marjory set up Alfred during a dinner with Marjory in order to interest him in her, but Marjory has to work hard as Alfred has little interest in love. After all of Pete's plans, including a disastrous picnic and home-baked meal and getting Alfred drunk, fail to inspire Alfred to propose, Pete and Marjory decide to try and make him jealous. After they kiss, however, both Marjory and Pete realize they are in love with each other, although neither one admits it. When Marjory cries for help according to their plan, Alfred encounters them and strikes Pete on the chin. Alfred's passion is not stirred, however, until Wally, hiding in the bushes, sprays him with the love potion his landlady used to calm her jealous husband. Alfred then proposes immediately and Marjory accepts.

When a hotel guest recognizes Marjory as a cigarette girl while she is rehearsing a number for the hotel's charity fête, the hotel manager becomes suspicious and plans to demand that she immediately pay her bill or be thrown out. Pete overhears the threats and, in order to save Marjory, has Wally steal a diamond pin he gave to Bubbles. They then raffle off tickets, purportedly to help orphans, offering the pin as a prize, and arrange for Bubbles' ticket to win. Alfred recognizes their trick and believes that they are swindling orphans. Pete reluctantly turns the money over to Alfred, who believes that Pete intended to use the money to start an oyster business. Alfred agrees to lend the money to Pete on the condition that he never again speaks to Marjory.

Pete sends the money to Marjory in an envelope, and she receives it just in time to pay her bill. Pete's caring gesture makes Marjory realize that she is sincerely in love with him, and she gently tells Alfred the truth about herself and rejects his proposal. Marjory is sorely dismayed when Pete denies being in love with her and insists that she leave with Alfred the next day, on a ship bound for New York. As the steamship departs, Alfred tosses a gift of $2,000 overboard to Pete, saying that Marjory convinced him it was a sound investment. Pete is now dejected that he has lost Marjory. Wally, believing that Bubbles has left with the ship, goes to his hut, but as he walks through the door, Bubbles sprays him with the love potion and walks the lovesick man over to a priest, who is waiting to marry them. Pete follows Wally into the hut and is delighted to find Marjory waiting for him, armed with the love potion. Pete assures her that she will not need the potion, and kisses her.

The working title of this film was "Cupid With A Beard".

"Happy Go Lucky" was Betty's first color film, and it was widely reported at the time that Paramount cameramen had dubbed her the "New Technicolor Queen". One veteran technician was quoted as saying, "Not since the advent of technicolor has a feminine star appeared who so ideally suited the color camera. Betty's skin coloring and texture, as well as her blonde hair, registers with the most telling effect. She uses no makeup."

From Paul Harrison's column from June 6, 1942: "Two of the most conscientious players in 'Happy Go Lucky' are comics Eddie Bracken and Betty Hutton. I watched them do a kissing scene several times, and when I looked for Bracken afterward, there he was in an off-stage clinch with Miss Hutton while a group of extras looked on appreciatively. He said they were rehearsing for the next shot, which was to be a different angle of the previous scene. After filming that one, the crew began readjusting lights and camera for a kissing close-up. Bracken waved away a make-up man and sought out Miss Hutton again. 'Betty,' he said, 'for the next shot my face has gotta be smeared with lipstick.' 'Of course!' said the actress gallantly, grabbing and kissing him. 'Ah, realism!' sighed the well-smeared and slightly dizzy Bracken. 'It's wonderful!'"

When Buddy DeSylva came to Paramount, he didn't like Edith Head's costume designs and wanted to get rid of her. DeSylva had given designer Raoul Pene du Bois a contract with the idea that he would specialize in Technicolor musicals and historical spectaculars. His designs for Betty in "Happy Go Lucky" were among his first and were certainly more theatrical than anything Edith would have submitted. However, Betty liked working with Edith, so she was kept on.

A Hollywood Reporter news item reported that the picture was originally slated as a vehicle for Bing Crosby and singer/composer Edna Heard was initially cast as "Tessie."

Paramount borrowed director Curtis Bernhardt from Warner Bros. for the production.

Dorothy Dandrige has a small appearance in this film as a chorine.