As the curtain rises, we are plunged into the social merriment of the Van Tassel harvest ball (THE HARVEST BALL IS HERE). Baltus proudly makes a formal announcement about his daughter's engagement as Ichabod and Katrina begin the couple's dance (WHAT WILL THE STARS REVEAL TONIGHT?). Martha then approaches Katrina, worried that ever since her cruel remarks, she hasn't been able to find Ezekiel anywhere. Katrina assures her that he is most likely in a secret place of his own and will return when he is ready. The other ladies approach Katrina to take her into the sitting room for a surprise. Martha, overcome with worry, decides to go look for Ezekiel.

The ladies have led Katrina into the sitting room with her eyes covered. Suddenly, with a yell of "Surprise," a beautiful wedding dress, a gift from Gretchen, is revealed. They all encourage Katrina to try the dress on as they imagine how wonderful the wedding will be (WEDDING DAY). During this time, Brom has entered the house and is watching Katrina, unseen by her or any of the other ladies. He has been drinking.

Out in the woods, we find Ezekiel, still upset over his embarrassing encounter with Martha. The storm is getting worse. Suddenly, he hears rustling in the trees nearby. He dismisses the sound until it comes again, closer, this time. Then, a hooded figure appears, carrying a sword. Ezekiel, terrified, runs as the figure seems to give chase. In his fear, he runs right into Martha, who has been out looking for him. He tells her that he saw a ghost, perhaps the Horseman, and it was after him. She calms his fears as they make their way back to the Van Tassel house. He apologizes for running away and she apologizes for her insensitivity. Martha encourages him to not be in such a hurry to grow up, just take his time and be a boy (WAIT).

Back inside the ballroom, Otto has just finished telling a ghost story when Brom, getting drunk now, takes the floor to tell one of his own. Baltus tries to make Brom leave, but allow him to tell his story first so as not to cause a bigger problem (THE HEADLESS HORSEMAN RIDES). After his story, Brom approaches Ichabod, ready for a fight, but Baltus intervenes, telling Brom, once again, to go home. Brom refuses to leave until Katrina agrees to marry him (BROM'S FINAL DEMAND). Brom now puts his plan into action by producing the old Revolutionary War scroll and issuing a challenge to Ichabod to read its contents aloud, thereby attaching the Horseman's curse to himself. Ezekiel pleads with Ichabod not to read the scroll, that he has seen the ghost out in the woods. Ichabod, feeling that he must overcome these senseless fears in order to be a proper husband, takes up the challenge and reads the scroll out loud for everyone to hear.

As the party winds to a close, we find Ichabod and Katrina on the front porch. Katrina suggests that Papa to take him home in his carriage, or even that he stay at the house for the night, but Ichabod declines, saying that since they have yet to be married, it would not be proper; but also, that he must put the irrational fears behind him once and for all. Ichabod gives Katrina a rose and promises to return before the pedals can fade to brown (ICHABOD'S FAREWELL). With a kiss, he disappears into the night.

Ichabod now begins his long walk home through the eerie darkness of the woods. Little does he know that Brom is lurking in the shadows with a horrible surprise (FOR YOU). Ichabod's vivid imagination seems to be getting the better of him as the night turns to pitch, becoming more sinister. He hears sounds he has never heard before. The trees seem to be closing in around him. Is it really just his imagination?

Suddenly, the dark hooded figure appears right in front of Ichabod. A terrible fight ensues and Ichabod is slashed across the face with the sword. Ichabod is thrown to the ground and instantly surrounded by three men wearing hooded cloaks. They bind his hands and stand him up. They finally show themselves as a constable and his men. Brom steps out of the shadows, revealing that he found Ichabod's indenture paper within the pages of his Psalmody book. The constable thanks Brom for helping to catch a runaway who has been on the run for more than two years.

When Brom accuses Ichabod of being a common criminal, Ichabod strikes back, pleading that he and his entire family booked passage on a ship from England, only to loose them all before they reached American shores. Therefore, he inherited everyone's debt for passage. The constable informs Ichabod that since he is a runaway, his indenture will be double as per the current law. Brom tells Ichabod that everyone will assume he disappeared at the hands of the headless Horseman. No one will be wiser since he read the scroll aloud at the party. Bound in ropes, Ichabod is led away to a waiting carriage to serve out the remainder of his indenture.

Finally, we return to where we began, the town square of Sleepy Hollow. Much like the beginning of the story, the people of the town are going about their daily business; life is continuing in Sleepy Hollow. However, unlike the opening, years are passing by. We see Martha standing with Otto, holding a baby. We see Brom and all the Boys building a new house.

We see Thelma with her husband, Peter, leaving the town. We see Baltus and Gretchen on the front porch of their home and Baltus now walks with a cane. Then we see their house again, except now we see only Gretchen. We see Brom gathered with some of the boys as he hold two babies in his arms. We see people coming and going through the town. Slowly, all of the others buildings disappear except for one house, worn by time.

The scene is now 30 years later; 1820. A much older Katrina is in front of the house, stooped over a large wash basin, washing clothes. An older man enters the scene and slowly approaches the house.