Margo accompanies director/lover Bill (with Eve tailing along) to the airport as he prepares to leave for Hollywood - even he admits to being taken by Eve's personality: "She's quite a girl, this what's-her-name...That lack of pretense, that sort of strange directness and understanding." In the beginning, Margo also develops a protective attitude toward Eve. She confesses to Bill her feelings for the innocent kid: "Suddenly, I've developed a big protective feeling for her. A lamb loose in our big stone jungle." Before Bill leaves, she also betrays her insecurities about aging - she fears losing him - a man eight years her younger - to a youthful actress:

Margo: Bill, don't get stuck on some glamour-puss.
Bill: I'll try.
Margo: You're not much of a bargain, you know. You're conceited, and faultless and messy.
Bill: Well, everybody can't be Gregory Peck.
Margo: You're a set-up for some gorgeous, wide-eyed young bait.
Bill: How childish are you going to get before you stop it?
Margo: I don't want to be childish. I'll settle for a few years.
Bill: Then cut that out right now.
Margo: Am I going to lose you, Bill? Am I?
Bill: As of this moment, you're six years old. (Eve interrupts their kiss.)

Margo befriends Eve and takes her under her wing - she invites Eve into her home and gives her a job as her confidential assistant/secretary: "That night, we sent for Eve's things. Her few pitiful possessions. She moved into the little guest room on the top floor. The next three weeks were out of a fairy tale and I was Cinderella in the last act." Eve begins to take over - Margo remembers that Eve ingratiated herself into every aspect of her life - as a Gal Friday: "Eve became my sister, lawyer, mother, friend, psychiatrist, and cop. The honeymoon was on."

After another stage performance and attentiveness from Eve, Margo tells Birdie: "You bought the new girdle a size smaller. I can feel it." Birdie replies: "Somethin' maybe grew a size larger." Birdie comments on her relationship to her boss:

I haven't got a union. I'm slave labor.

In contrast, Birdie smells trouble, and points out that Eve is assisting in things that should be done by theatrical union members. Margo catches Eve admiring herself in front of a mirror with her own stage costume - at first, she understands Eve's envy for her career. Birdie, however, warns Margo that Eve is not what she seems and that she is being conned. Even though she works "night and day" and is loyal and efficient - "like an agent with only one client," she is also obsessed and fascinated with Margo:

I'll tell ya how, like, like she's studyin' you, like you was a play or a book or a set of blueprints. How you walk, talk, eat, think, sleep.

Margo's sympathy for Eve slowly turns into alienation and hostility. To Margo's surprise, Eve has already anticipated and planned a welcome home (from Los Angeles) and belated birthday party for Bill ("a night to go down in history"), to be attended by all the leading lights of the New York theatrical world. Paranoid and suspicious, Margo smells "disaster in the air" even before the party begins. Margo is also upset with all the attention that Bill is paying to Eve in the downstairs living room - before even saying hello. She senses Eve's conniving methods, as she overhears Bill tell Eve about the time he looked into the wrong end of a movie camera finder. Fearful that Eve is turning her attentions toward her own boyfriend, Margo sarcastically breaks up their conversation: "Remind me to tell you about the time I looked into the heart of an artichoke."

Margo is clearly plagued by jealousy, "age obsession" and "paranoiac insecurity" and acerbic toward Eve - "she's a girl with so many interests." When Margo questions Eve's motivations, qualities, posturings, and character with some jealousy, Bill accuses her of being unreasonable and temperamental:

Bill: We [he and Eve] started talking. She wanted to know about Hollywood. She seemed so interested.
Margo: She's a girl of so many interests.
Bill: A pretty rare quality these days.
Margo: A girl of so many rare qualities.
Bill: So she seems.
Margo: So you've pointed out so often. So many qualities so often. Her loyalty, efficiency, devotion, warmth, and affection, and so young. So young and so fair.
Bill: I can't believe you're making this up...Of course it's funny. This is all too laughable to be anything else. You know what I feel about this age obsession of yours. And now this ridiculous attempt to whip yourself up into a jealous froth because I spent ten minutes with a stage-struck kid.
Margo: Twenty.
Bill: Thirty minutes, forty minutes, what of it?
Margo: Stage-struck kid! She's a young lady of quality. And I'll have you know I'm fed up with both the young lady and her qualities. Studying me as if I were a play or a blueprint, how I walk, talk, think, act, sleep.
Bill: Now, how can you take offense at a kid trying in every way to be as much like her ideal as possible?
Margo: Stop calling her a kid. As it happens, there are particular aspects of my life to which I would like to maintain sole and exclusive rights and privileges.
Bill: For instance what?
Margo: For instance you.
Bill: This is my cue to take you in my arms and reassure you. But I'm not going to. I'm too mad...
Margo: (interrupting) Guilty.
Bill: ...Mad! Darling, there are certain characteristics for which you are famous onstage and off. I love you for some of them in spite of others. I haven't let those become too important. They're part of your equipment for getting along in what is laughingly called our environment. You have to keep your teeth sharp, all right. But I will not have you sharpen them on me - or on Eve.
Margo: What about her teeth? What about her fangs?
Bill: She hasn't cut them yet, and you know it! So when you start judging an idealistic, dreamy-eyed kid by the barroom benzedrine standards of this megalomaniac society, I won't have it. Eve Harrington has never by a word, a look, or a suggestion indicated anything to me but her adoration for you and her happiness at our being in love. And to intimate anything else doesn't spell jealousy to me. It spells out paranoiac insecurity that you should be ashamed of.
Margo: Cut! Brilliant! What happens in the next reel? Do I get dragged off screaming to the snake pit?

When the guests begin to arrive, Margo is again reminded of everyone's high regard for Eve. Lloyd Richards lauds her: "I like that girl, that quality of quiet graciousness." Karen also reinforces their regard for Eve:

Karen: Margo, nothing you've ever done has made me as happy as your taking Eve in.
Margo: I'm so happy you're happy.

Margo begins to get roaring drunk and feels "Macbethish" in mood - she snidely calls Eve "the Kid" and "Junior," feeling menaced by the deceptive young actress. At the height of her bitchery, she warns some of the birthday party guests about what to expect in the film's most famous line - it is delivered as a lip-sneering, nasty admonition:

Lloyd: The general atmosphere is very Macbethish. What has or is about to happen?
Margo: What is he talking about?
Bill: Macbeth.
Karen: We know you. We've seen you like this before. Is it over or is it just beginning?
Margo: (after gulping down another martini and marching to the staircase) Fasten your seat belts, it's going to be a bumpy night.

Margo informs theater critic Addison De Witt as he arrives that she was distinctly certain that she had removed his name from the guest list for the party. He caustically tells the aging Broadway actress to grow up:

Dear Margo. You were an unforgettable Peter Pan. You must play it again soon.

To Margo, De Witt introduces his protege/date of the moment, a bimbo date and so-called actress named Miss Casswell (Marilyn Monroe) in another very famous line:

Miss Casswell is an actress, a graduate of the Copacabana School of Dramatic Arts.

Eve is also introduced to De Witt as having "a great interest in the theatre," though she feels inadequate in the famed critic's presence:

Eve: I'm afraid Mr. De Witt would find me boring before too long.
Miss Casswell: (clarifying) You won't bore him, honey. You won't even get a chance to talk.

De Witt points out producer Max Fabian to starlet Miss Casswell and instructs her as he removes her white furrish shoulder wrap to expose her strapless dress with cleavage. She responds that all theatrical producers look like "unhappy rabbits":

De Witt: Do you see that man? That's Max Fabian, the producer. Now go and do yourself some good.
Miss Casswell: Why do they always look like unhappy rabbits?
De Witt: Because that's what they are. Now go and make him happy.

De Witt escorts Eve into the party, leaving Margo at the stairs drinking another martini. Getting more drunk [with alcoholic embalming fluid] and morbid, she prefers to hear only sad tunes on the piano as she sits on the piano bench next to the piano player. She insists that he play the same sad song, Liebestraum, for the fifth "straight time." Bill joins her and asks about viewing the body - a comment about the funeral atmosphere hanging over the supposedly 'happy birthday' party. Margo is depressed about her age (in contrast to Eve's youthful vitality) and has remained that way to spite Bill:

Bill: Many of your guests have been wondering when they may be permitted to view the body. Where has it been laid out?
Margo: It hasn't been laid out. We haven't finished with the embalming. As a matter of fact, you're looking at it - the remains of Margo Channing, sitting up. It is my last wish to be buried sitting up.

She later criticizes the heartlessness of critic De Witt, when Max describes his heartburn: "Everybody has a heart, except some people."

In the pantry, Margo promises her faithful producer Max that she will consider Miss Casswell (De Witt's protege) as a replacement for her understudy, and will read with her during the audition to be held in a few weeks. As a swap of favors, since Margo hopes to get Eve out of her life as gracefully as possible, Margo asks Max to give Eve a job in his office, but he initially objects: "I wouldn't think of taking that girl away from you...What would she do?...I don't think it's such a good idea." After some prodding, Max accepts her suggestion.

Eve has effectively played upon Margo's fear of getting old. The aging actress expresses her doubts about her age to playwright Lloyd, especially in playing the lead character of Cora, a young 'twenty-ish' woman, in his new play:

Lloyd, I am not twenty-ish. I am not thirty-ish. Three months ago, I was forty years old. Forty. Four oh - That slipped out. I hadn't quite made up my mind to admit it. Now I suddenly feel as if I've taken all my clothes off.

She is beginning to glimpse the downward slope and is haunted by the specter of growing old, especially when compared to her younger Bill: "Bill's thirty-two. He looks thirty-two. He looked it five years ago. He'll look it twenty years from now. I hate men."