Ned Kynaston (Billy Crudup) is one of the leading actors of his day, famed for his portrayal of female characters, particularly Desdemona in Othello. His loyal dresser, Maria (Claire Danes), longs to perform on stage but is forbidden to do so by a law enacted by the Puritans prior to the return of the House of Stuart to the throne. She fulfills her desire by appearing in plays presented in a local tavern under the name Margaret Hughes. Word of her performances spread and the novelty of a woman on stage draws the attention of Sir Charles Sedley (Richard Griffiths), who offers to be her patron, and eventually the attention of King Charles II (Rupert Everett) himself.

Kynaston's rant against allowing women on stage is overheard by Nell Gwynn (Zoe Tapper), an aspiring actress and Charles II's mistress, and she literally seduces Charles into banning men from playing female roles. As a result, Kynaston loses his lover, George Villiers (Ben Chaplin), the Duke of Buckingham, and the acceptance of London society. Unable to shake the feminine characteristics he has perfected over the years, he is reduced to performing bawdy songs in drag in music halls, while Maria's career thrives.

When Maria is called upon to portray Desdemona for the king, she panics and implores Kynaston to coach her. Not only does he agree, but he insists on replacing company head Thomas Betterton in the role of the titular protagonist. In doing so, he discovers his ability to portray a male character, while Maria evolves from an actress of middling talent to an acclaimed theatrical star.

While the film is rooted in historical fact - the first English theatre actress, although her name is unknown, is believed to have performed the role of Desdemona — some liberties with the truth were taken. Nell Gwynne is represented as a mistress of the King who subsequently becomes an actress, but in reality she already was a noted theatre personality when Charles II met her. The sequence in which Maria and Kynaston discover naturalistic acting is anachronistic, as naturalism was not developed until the 19th century.

Interiors were filmed at the Old Royal Naval College in Greenwich and Shepperton Studios in Surrey. According to commentary by production designer Jim Clay on the DVD release of the film, because so little English Restoration architecture remains in London, and documentation of the period is minimal, he was required to use his imagination in creating buildings and back alleys on sound stages.

In the DVD commentary, several cast members recall the film was shot during the hottest UK summer on record (2003), and the temperature under the lights usually hovered at 46 degrees C (115 F), making performing in the heavy, layered costumes a grueling experience.

Twelve costume houses were involved in the production, including The Royal Shakespeare Company, The National Theater, and Angels & Bermans, as well as the Italian houses Sartoria Farani, Tirelli, Costumi d'Arte, E. Rancati, G.P. 11, and Pompei.

The film premiered at the Tribeca Film Festival in May 2004 prior to its general release in the UK. It was shown at the Deauville Film Festival, the Toronto Film Festival, and the Dinard Festival of British Cinema in France before opening in New York City.

In his review in the New York Times, A.O. Scott said, "At times, the movie feels like a fancy-dress version of A Star Is Born . . . Mr. Crudup's fine features, which flicker between masculine and feminine as the lighting changes and the mood shifts, are well suited for the role, though his sinewy, birdlike frame suggests Hollywood anorexia more than Restoration curviness . . . Stage Beauty is both timorous and ungainly, words that might also describe Ms. Danes's performance. Trapped in an English accent and in a character who must appear conniving and warmhearted in turn, she veers from teariness to brisk indignation like an Emma Thompson doll with a jammed switch. The British actors in smaller roles handle the material better . . . George Fenton's Sunday-brunch score, on the other hand, is an indigestible dose of good taste ladled heavily over even the film's witty and delicate moments."

David Rooney of Variety called the film "an intelligent and entertaining adaptation . . . skillfully acted, handsomely crafted" and added, "Eyre's spry direction of the refreshingly literate, witty drama shows a pleasingly light touch and a genuine feel for the bustle, backbiting and rivalry of the theater milieu . . . In a delicately measured performance that favors graceful subtlety over campy mannerism, Crudup conveys a nuanced sense of a man struggling to know himself . . . Put in the unenviable position of playing second fiddle to her male co-star in terms of feminine allure, Danes is lovely nonetheless . . . George Fenton's rich orchestral score enlivens the action with an occasional rousing Celtic flavor."