Private detective Sam Grunion has been searching for the extremely valuable Royal Romanoff diamonds for eleven years, and his investigation leads him to a troupe of struggling performers, led by Mike Johnson, who are trying to put on a musical revue called Love Happy.

After three days of interrogation, Harpo still refuses to talk, and when he is left alone, he calls Faustino at the theater, using the bike horn he carries in his pocket to communicate.

When he finds Maggie crying in her dressing room, Harpo takes her to Central Park, where he plays the harp for her and gives her the diamonds as a birthday gift.

At the theater, Lefty and the Zoto brothers spy through a window as Maggie puts on the diamond necklace, but Mike asks her not to wear it, promising to buy her an engagement ring instead.

The curtain goes up, and when Harpo sees Lefty and the Zoto brothers menacing Maggie, he distracts them with a piece of costume jewelry and leads them up to the roof.

Meanwhile, on stage, Faustino plays the piano, and when he strikes the keys forcefully, the diamond necklace flies into the air, drawing the attention of Madame Egelichi, who is watching from the audience.

Chico plays a duet on "Gypsy Love Song" with actor-musician Leon Belasco as Mr. Lyons, the owner of the stage props and costumes.

Love Happy was originally conceived as a solo vehicle for Harpo under the title Diamonds in the Sidewalk,[2] Chico, who was usually in need of money due to his lifelong gambling addiction, also became involved in the project.

In its October 8, 1949 front-page editorial, as well as its review of the movie in the same issue,[4] the motion picture trade periodical Harrison's Reports, which always disapproved of any movie showing brand-name products, severely criticized this film for its rooftop chase among billboards promoting Baby Ruth, General Electric, Fisk Tires, Bulova watches, Kool cigarettes, Wheaties and Mobil gasoline.

At the end of his March 8, 1950, episode of his You Bet Your Life radio show, Groucho half-heartedly promotes the film as "Harpo, Chico, and I tell a few jokes and do some acting.

In later years, on Today, Groucho dismissed it as a "terrible picture", while speaking of the lasting impression Marilyn Monroe made during her screen test.