The musical is based on Gregory Maguire's 1995 novel Wicked: The Life and Times of the Wicked Witch of the West, itself a retelling of L. Frank Baum's classic 1900 novel, The Wonderful Wizard of Oz.

Elphaba Thropp is modeled after the Witch portrayed by Margaret Hamilton in the classic 1939 film The Wizard of Oz: green-skinned, clad entirely in black and wearing a tall peaked hat. Maguire formulated the name "Elphaba" from the phonetic pronunciation of Baum's initials L.F.B.

As the musical opens, the Ozians are rejoicing over Elphaba's death, but Glinda the Good Witch explains that the "Wicked Witch" wasn't always wicked.

Elphaba's mother had an affair with a traveling salesman while Elphaba's father, who just happened to be the governor of Munchkinland, was out of town. Elphaba was born with green skin because of a drink her mother purchased from the salesman and drank during their affair. Upon seeing the color of her skin, Elphaba's father rejected her.

Shiz University is an institution of higher education in the city of Shiz in Gillikin, the northern province of Oz.

Nessarose, Elphaba's beautiful and physically disabled younger sister, eventually becomes the Wicked Witch of the East.

When Madame Morrible discovers Elphaba's natural talent for magic, she suggests that she might one day work with the Wonderful Wizard of Oz, something Elphaba has always dreamt of ("The Wizard and I").

At first Galinda is uncomfortable around Elphaba, due to her green skin and lack of social standing.

Doctor Dillamond is a Goat (a talking goat with a capital "G" as opposed to a goat with a lower case "g", which is merely a regular farm animal) and professor at Crage Hall in Shiz. Assisted by Elphaba, Dr. Dillamond conducts research on the genetic differences between animals and Animals.

Fiyero is the prince of the Arjiki tribe in the Vinkus (derogatorily referred to as Winkie Country by outsiders).