Countess Waldner, anxious about her husband’s imminent bankruptcy, consults a fortuneteller. She pins all her hopes on a good marriage for her elder daughter, Arabella, a beautiful, distinguished girl who is not short of eligible suitors. Zdenka, her younger daughter, is meanwhile disguised as a boy to avoid the expense of suitably presenting two girls in Viennese society.

Matteo is a young officer, passionately in love with Arabella. She, however, does not love him. Zdenka, whom Matteo takes for Arabella’s brother, protects him from the truth by forging letters from Arabella in order to keep his hope alive. Zdenka loves him herself, but in her masculine guise cannot confess it.

Arabella, returning from her walk, is fascinated by the image of a stranger she saw opposite the hotel. Zdenka persistently urges Arabella to accept Matteo, until eventually Arabella explains that she cherished within her an ideal of ‘the right man.’ For her, marriage is such a sacred state that compromise disgusts her.

It is, perhaps, Elemer? He is a brilliant, dashing nobleman of great wealth and style who is currently the leading contender. Arabella flirts with him wittily but finally refuses to go sleighing with him unchaperoned.

Count Waldner reveals to his wife that he is flat broke. He had been hoping to hear from Mandryka, an old regimental comrade to whom he had written, enclosing a photograph of Arabella, hinting that she was available. Suddenly Mandryka is announced and Waldner is overjoyed; but in walks a total stranger. Old Mandryka is dead, and the visitor is his nephew and heir. He had fallen in love with the picture of Arabella, and has now come from distant Slavonia to see if she is still single. Waldner consents to their marriage, borrows a few thousand from his future son-in-law and returns at once to his gambling. Arabella, unaware of these events, fantasizes about the stranger she saw that morning, but finally forces herself to face reality. She has been chosen as Carnival Queen for the Cabbies’ Ball, the highlight of the Mardi Gras celebrations, and she resolves that there and then she must make her choice.

Arabella and Mandryka meet for the first time at the Cabbies’ Ball. To the chagrin of Arabella’s other suitors, the two fall immediately in love. They exchange personal vows and imagine life together in Slavonia. He tells her how, were they there now, she would by custom bring him a glass of clear water from the well as a token of their troth.

However, Arabella is aware of her obligations as the Carnival Queen and asks Mandryka to leave her among her friends to bid farewell to her girlhood. He says that his place is near her, but she has his leave to ignore him for the rest of the evening.

At this point the three suitors lead the entire company in to crown Arabella as Carnival Queen. After the ceremony, dominated by Fiakermilli, the Cabbies’ “mascot,” Arabella leads everyone back to the ballroom. Mandryka informs the ecstatic Waldners that Arabella has accepted him, and orders a celebratory supper for them, with champagne for the entire company. Then Arabella takes leave for the last time of the three suitors who have been closest to her. Matteo finds Arabella’s radiance bitterly painful, since it is not directed at him. Zdenka sees his desperation and urges him to accept an envelope from her. It contains, she says, the key to Arabella’s room. He is to leave the ball immediately to go to her, where she will grant all he desires.

Unfortunately, the scene is witnessed by Mandryka, who is stung into a fury of disbelief, jealousy and humiliation. His servants fail to find Arabella in the ballroom, and his suspicions seem to be confirmed when one of them brings a note from Arabella saying she has left early and looks forward to seeing him tomorrow. At this, his self-control breaks down completely as he coarsely toasts Fiakermilli. Eventually Countess Waldner intervenes, and when Mandryka insults her, she sends for her husband. He insists that Mandryka accompany them home to seek out the truth. Mandryka’s parting shot is to invite the Viennese he so bitterly despises to drink all his champagne, and it is left to Fiakermilli to rescue the party.

The key was in fact to Zdenka’s room, not Arabella’s, and Matteo emerges thinking that it is to Arabella he has been making love. His amazement at finding her a few minutes later fully dressed in the hotel foyer is quickly superseded by frustration and rage at her complete lack of tenderness toward him. The Waldners and Mandryka return from the ball. In spite of Arabella’s denial, Mandryka is convinced of her guilt, and matters deteriorate when Matteo attempts to protect her. Finally, since Arabella refuses to satisfy the question of honor by agreeing to marry Matteo, Mandryka agrees to a duel.

Suddenly Zdenka, no longer disguised as a boy, rushes downstairs in terror and confesses all. Mandryka begs forgiveness of Arabella and in a great outburst of generous feeling asks Waldner to give Zdenka to Matteo. As the family retire, Mandryka remains in the darkened foyer cursing his failure to trust Arabella. His heavy heart is lightened when Arabella emerges from her room and, in the traditional Slavonian manner, brings him a glass of water to set the seal on their betrothal.