In the city square of Seville near a cigarette factory a guard-house is situated. Dragoons, street boys, girls from the cigarette factory with their admirers stroll in an agile crowd. Carmen appears.  Spirited and courageous she is used to run the show. Meeting with dragoon José awakes her passion. Her habanera, a song of free love, is a challenge to José, and a flower, thrown to his feet, promises love. José’s fiancée Micaëla comes and forces him to forget an insolent Gypsy for a moment. He recalls his native village, house, mother and evokes sweet memories. Carmen disturbs the crowd once again. This time she’s begun a quarrel at the factory and Josè has to escort her to a prison. But Gypsy’s charm is omnipotent. Being subdued to it, Josè violates the order and helps Carmen to escape.

In Lillas Pastia’s inn merriment is in full swing. It’s the place of smugglers’ secret meetings, whom Carmen helps. Together with her friends Frasquita and Mercédès she spends her free time singing and dancing. Toreador Escamillo is a welcome visitor of the inn. He is always cheerful, confident and brave. His life is full of worries.

He struggles dangerously in the arena but the hero has sweat reward: love of pretty girls and fame. The darkness falls. Visitors leave the inn. In darkness of the night smugglers gather for a dangerous business. This time Carmen refuses to go with them. She waits for a friend. José enters the inn. But the joy of their meeting is momentary. Military bugle calls the dragoon back into barracks. Passion fights with obligation in his soul. Carmen is angry. A quarrel between the beloved is about to happen.

Suddenly José’s commander Zuniga appears. He hopes for Carmen’s love. Military oath is broken, and return to barracks is impossible. José stays with Carmen to begin a new life, filled with worries and dangers.

In the dead of night in mountains smugglers halt. Carmen and José are with them. A quarrel in the inn isn’t forgotten. There is a very big difference between the lovers. Dreaming of a quiet peasant life José suffers from the broken oath and homesickness. Only passionate love to Carmen keeps him in the smugglers’ camp. But Carmen doesn’t love José any more.  They will imminently break off their relations. And what do her cards say? They foretell happiness to her friends, only for Carmen fate doesn’t foretell happiness: she reads her death in cards. With deep sorrow she thinks about the future.

Escamillo suddenly comes: he hurries to meet Carmen. José bars the way to Carmen. Jealousy and rage burst in the dragoon’s soul. Carmen stops the rivals’ duel. At this moment José notices Micaëla. She has overcome her fear and appears in the smugglers’ camp to take José back home. José ignores her words. Only news about the fatal illness of his mother makes José leave Carmen. But their meeting is in the future.

Bright sunny day. A square in Seville is filled with crowd which waits impatiently for the start of a bull-fight. They greet loudly and gaily passing corrida heroes and their favourite toreador Escamillo. Frasquita and Mercédès warn Carmen about the danger: José follows her persistently. Carmen doesn’t listen to them. She intends to go to circus. José stops her. Tenderly and with love he speaks to Carmen. José cannot believe that she does not love him any more. But Carmen’s answer is implacable: it’s all over between them. “Free I was born and free I will die”, – she says proudly to José. In a fit of anger he stabs her with a dagger. She confirms her freedom with death.