Diana Ross, in her feature film debut, portrays Holiday, alongside a cast that includes Billy Dee Williams, Richard Pryor, James T. Callahan and Scatman Crothers.

Billie tires of scrubbing floors and becomes a prostitute, but soon quits and returns to a nightclub to unsuccessfully audition to become a showgirl.

After "Piano Man" accompanies Billie when she sings a song,[a] club owner Jerry books her as a singer in the show.

Eventually, she is discovered by Harry and Reg Hanley, two bandleaders who sign her as a soloist for their southern tour in hopes of landing a radio network gig.

[b] The harsh experiences on the tour result in Billie taking drugs, which Harry supplies after she collapses on stage.

Louis, suspicious that Billie broke her promise, takes her back to his home but refuses to allow her access to the bathroom or her kit.

[3] Vincent Canby of The New York Times described Ross as "an actress of exceptional beauty and wit, who is very much involved in trying to make a bad movie work ... her only apparent limitations are those imposed on her by a screenplay and direction seemingly designed to turn a legitimate legend into a whopper of a cliché.

"[8] Variety wrote, "For the bulk of general audiences, the film serves as a very good screen debut vehicle for Diana Ross, supported strongly by excellent casting, handsome '30s physical values, and a script which is far better in dialog than structure.

And it is just that—entertaining—because of an old fashioned grand dame performance by Diana Ross, late of the pop-rock scene, in the title role.

"[11] Charles Champlin of the Los Angeles Times wrote that Ross gave "one of the truly fine screen performances, full of power and pathos and enormously engaging and sympathetic".

It has what makes movies work for a mass audience: easy pleasure, tawdry electricity, personality—great quantities of personality.

"[13] Tom Milne of The Monthly Film Bulletin wrote that Ross did "a remarkable pastiche job on the tone and timbre of Billie Holiday's voice, [but] misses the elegant, almost literary wit of her phrasing", and found the presentation of Holiday's life story "offensively simplistic".

[14] Society's perception of race plays a role in the reception of Lady Sings the Blues and the criticism of Diana Ross as Holiday.

Ross's public perception as an "honorary white girl"[15] made her less appealing for the role of Billie Holiday.