High and low dispersion spectrophotometric observations of the active galaxy NGC 1566 taken over a 14-month period are presented. During this time, the nuclear spectrum changed from one closely resembling a Seyfert 1.9 to one closely resembling a Seyfert 1.2. The observed nuclear spectrum is decomposed into an underlying stellar component and a varying nonstellar component, which increased by a factor of five at 3700 A over this period. Overall, the Balmer lines followed the nonstellar continuum in direct proportion. The observations suggest that the broad-line region (BLR) is a single compact region. During a rapid burst, however, both broad H-alpha and H-beta appeared to increase before the continuum at 5000 A, suggesting that this part of the continuum may be only indirectly linked to the ionizing mechanism. The broad Balmer profiles maintained their shapes throughout the observing period, suggesting radiation-bounded BLR clouds and a BLR radius less than 0.01 pc.