The fairy Iolanthe was banished by her Fairy Queen for marrying a mortal, which is against fairy laws, and rather than sentence her to death, she commuted it to one of penal servitude. Twenty five years later the fairies plead with their Queen to pardon Iolanthe and she relents. Iolanthe informs the fairies that she has a son, Strephon, who is half fairy - half mortal and he has fallen in love with Phyllis, a ward-in-chancery.
All is well until Phyllis, with the Peers, discovers Strephon with his mother and believes he has been unfaithful to her (fairies don't age of course). The Peers encourage Phyllis to denounce her lover because they would all like to gain her hand in marriage. Strephon calls upon the aid of the fairies and enraged by the Peers' behaviour, the Queen decrees that Strephon shall become a Member of Parliament.
Once in Westminster the Queen falls for the charms of the Sentry but has to subdue her feelings. Iolanthe discloses herself to her husband, who is none other than the Lord Chancellor, to save Strephon from losing his love. To save all the fairies from being slaughtered for choosing to marry from the peers, the Lord Chancellor calls upon his legal prowess.