Officers on guard duty near a cigarette factory pass the time people-watching. Micaëla, a girl from the country, approaches them, asking for Don José. They tell her he will be there soon. A bell rings, the women working in the factory emerge from their afternoon break, and the men all ask for Carmen. When she finally appears, they ask when she will love them, but she believes her love is unpredictable. Since Don José is doing his best to ignore her, Carmen tempts him, tossing a flower at him.
When the cigarette girls have gone into the factory, Micaëla approaches Don José with a kiss and a letter from his mother. In the letter, José’s mother encourages him to marry Micaëla. But a hubbub bursts out in the cigarette factory: Carmen has gotten into a fight with a colleague. Zuniga arrests Carmen and assigns Don José to guard her. Carmen seduces Don José, who lets her escape. José is hauled off to prison.
At a tavern a month later, Carmen, Frasquita, and Mercédès dance while Zuniga and some officers look on. Zuniga tells Carmen that Don José has served his time in prison and was released that very day. Escamillo arrives with a crowd of admirers and impresses everyone except Carmen. After he leaves, Carmen and her friends plan a smuggling operation with Dancaïre and Remendado. The men want Carmen to accompany them, but she refuses, saying that she is in love.
Don José arrives and declares his love for Carmen. She begins dancing for him, but he stops her when a bugle summons him back to the barracks. When he declares he must go, she mocks his sense of duty. Hurt, he shows Carmen that he still has the flower she tossed at him. She asks him to run away with her. Zuniga returns, hoping to find Carmen alone, and he and José draw swords; Dancaïre and Remendado separate them. Rather than go back to prison, Don José agrees to join the smugglers.
At the smuggler’s hideout, Don José and Carmen quarrel. Carmen is done with him, but he is unwilling to leave her. Mercédès, Frasquita, and Carmen foretell their futures in the cards; the first two find love and wealth, but Carmen sees only death. The bandits leave—the women will distract the customs guards while the men smuggle their contraband. Escamillo comes looking for Carmen. He fights with Don José, but Carmen intercedes. Micaëla appears and implores Don José to return to his mother, who is dying. Carmen tells him to go, but Don José warns her they are not yet through.
Outside the bullring in Seville, Carmen and Escamillo profess their love for each other. Frasquita cautions Carmen that Don José is waiting for her. Carmen says she is not afraid and goes to confront him. He begs her to leave with him, but she refuses. She throws a ring José gave her at his feet, and he stabs her.