A square in Seville. Soldiers pass, pretty girls pass. A woman asks for Corporal José. The soldiers invite her to linger until he returns, but she promises rather to return for the changing of the guard.

The whistle blows at the cigarette factory. Carmen, a Romani woman, lingers on the way to work, unfurling her smoky charms for a crowd of admirers in a habanera about the fickleness of love. José pays her no mind. She pitches a red cassia flower at him. He picks it up and hides it in his shirt when Micaëla enters to tell him of life at home and to give him the letter and the money his mother has sent. He pledges Micaëla his love and faith.

Screams are heard from the factory. Carmen has knifed another cigarette girl. Since she won’t answer Lieutenant Zuniga’s questions about the fight, José has no choice but to arrest her. She doesn’t seem to mind. Soon he has helped her escape. He is arrested.

Lillas Pastia’s club. Carmen and her friends Frasquita and Mercédès are singing and dancing at the tavern. The famous bullfighter Escamillo enters and raises a toast to the assembled company. Carmen is impressed, but she tells the toreador she’s seeing someone. When he leaves, a crowd follows him. The hour grows late and Pastia closes the tavern, leaving Dancaïre and Remendado to explain their new business scheme to the women. Frasquita and Mercédès are willing to start off at once, but Carmen insists on waiting for José, who has just been released from prison. They suggest converting him to their band.

José comes in and Carmen makes him jealous by telling him she’s been obliged to dance for Zuniga and the other officers. She begins to dance for him, but soon he hears the bugle call to return to his barracks. She taunts him for yielding to duty and not to love. As proof of his passion, he pulls out the flower she threw at him. Carmen says, if he really loved her, he’d desert the army and go with her and her friends. Zuniga enters in search of Carmen and jealous José fights him. Carmen’s cry brings the band running back. They disarm the men, Zuniga leaves and now José has no choice but to head for the mountains.

A rocky pass in the mountains. The smugglers relish the perils of their assignment. José misses his mother, his home and his honest reputation, and Carmen dares him to go back. He threatens her: he’ll never leave. She says she is in the hands of Fate. Frasquita and Mercédès decide to play cards to tell their fortunes however, each time Carmen shuffles and deals, she sees the Nine of Spades: Death. Her life is still in the hands of Fate.

Dancaïre enters to call them to their posts to carry the next shipment. A guide enters the pass unseen, leading Micaëla to where she might find José. She prays for the strength to reclaim her sweetheart from this other woman’s clutches. Now Escamillo enters in search of Carmen, and José challenges him to fight. Just as Escamillo’s knife snaps, Carmen steps in to separate the rivals. Escamillo invites everyone to his next fight in Seville. Then Remendado and Dancaïre find Micaëla hiding. She is overjoyed to see José, and she begs him to come home. Carmen seconds the advice. He says he’d rather die than leave her — but when Micaëla reveals that his mother is dying, he leads her away. Escamillo’s voice is heard in the distance.

The arena in Seville. The crowd celebrates as the festival procession approaches the bullring. Escamillo enters with Carmen on his arm. Frasquita warns Carmen that José is nearby. Carmen waits calmly for him. José pleads with her to leave the bullfighter and start a new life together. She knows her hour has come, she says, yet she won’t go with him. He begs her not to go. She says she doesn’t love him. He bars her way. She throws her ring at him. He stabs her. She falls.