A public square in Seville. Micaela has come from her village in Navarra to find her childhood friend, Jose, who is now a corporal in the army, stationed in Seville. As Jose arrives with his fellow soldiers he is told that a girl has been searching for him. He knows it must be Micaela. When the noonday bell sounds from the cigarette factory located on the square, the girls from the factory come out. People assemble especially for this daily occurrence to see their favorite cigarette girl, a gypsy named Carmen. Jose pays little attention to her and his attitude, a change, attracts her. She throws a flower at his feet and leaves. Alone, Jose picks up the flower and is about to throw it away when Micaela calls him. He pockets the flower and runs happily to greet the young girl. Meanwhile. Carmen and another girl have been fighting. Zuniga, a lieutenant, orders Carmen’s arrest, and leaves her in the care of Jose who is to take her to prison. She invites him to a meeting with her at the tavern of Lillas Pastia if he will permit her escape. He agrees and she runs off.

At Lillas Pastia’s tavern. Escamillo, the famous matador, enters while Carmen is dancing for Zuniga and other officers. He is at once attracted to Carmen. Carmen’s smuggler friends have persuaded her to ask Jose to join their band. When he enters, just released from prison, she tries but he refuses. Zuniga, who has left the tavern for a while, returns for Carmen and finds her with Jose. Jose draws a sword against Zuniga, his superior officer, and now has no choice but to join the smuggling band.

A mountain pass. Time has cooled Carmen’s love for Jose, who tells her that he would rather kill her than give her up. Carmen reads her fortune in a deck of cards and sees that this will happen. After the smugglers leave with part of their contraband, asking Jose to guard what remains, Micaela appears searching once again for Jose. Escamillo also arrives looking for Carmen and Jose fires a shot which frightens Micaela, who hides. The two men draw daggers but the returning smugglers prevent a fight. Escamillo invites them to attend his coming bullfight and leaves the band. Micaela is discovered and she tells Jose that his mother is near death. Jose must go with Micaela but before leaving he threatens Carmen once more.

A square in Seville at the entrance of the building. Carmen appears on the arm of Escamillo who is dressed for the arena. She is warned that Jose is waiting for her in the crowd but refuses to leave. She meets Jose, they quarrel, and she throws her ring at his feet. Blind with rage, he stabs her. He admits his guilt to the crowd and asks to be arrested.