Act I
The opera opens in a square outside of a tobacco factory in 1820s Seville. A group of soldiers and their corporal, Morales, reflect on their easygoing lives. Micaëla enters the square and asks Morales if he has seen Don José. The corporal tells her that José will arrive when the new guard relieves the old, and the soldiers offer to entertain her in the guardhouse in the meantime if she'll accept their invitation. She declines, and the soldiers return to watching passers-by. Street urchins imitate the new guard, including José and his lieutenant, Zuniga, as they enter.

A bell rings, signaling a break for the women who work in the tobacco factory. They flood the square to enjoy their cigarettes. Carmen emerges from the crowd, and young men demand to know when the sensuous gypsy goddess will favor one of them with her love. She enigmatically tells them that love is a rebellious bird that they will never tame, a gypsy child that mocks their conventions. José catches her eye, and she teasingly throws him a flower.

Micaëla finds José, bringing with her a letter from his mother suggesting that they marry. Shouts from within the factory interrupt their reverie of life together; Carmen has slashed another worker's face with a knife. Zuniga demands that Carmen explain herself, but she defies him. He orders José to arrest her and take her to prison. On the way, she promises to meet José at Lillas Pastia's tavern if he helps her escape, and, intoxicated by the gypsy, he can't refuse.

Act II
Two months have passed, and Carmen and her friends entertain officers with gypsy songs and dances at Lillas Pastia's. Escamillo, a bullfighter, swaggers in and shares a drink with his admirers. He and Zuniga have their eyes on Carmen, and both declare their love. Flattered, she nevertheless refuses their advances. Zuniga promises to return later that evening, hoping she will have changed her mind. As the tavern clears out, two smugglers enter and ask Carmen and her companions Frasquita and Mercédès to help them with a job that night. She refuses because José, imprisoned for abetting her escape, was just released and could show up at any minute. Just as José arrives, the call sounds from the barracks, and he insists that he has to leave. Upset, Carmen protests that if he really loved her, he would join her and the smugglers that night in the mountains. With impeccable timing, Zuniga arrives to seduce Carmen. In a fit of jealousy, José attacks his lieutenant. The smugglers drag Zuniga away, and José has little choice but to go with them.

Act III, Scene One
In the smugglers' hideout, José and Carmen fight again. Tired of being persecuted, she tells him to leave and then joins Frasquita and Mercédès for some fortune-telling. The cards promise nothing but death for her and José. The leader of the smugglers enters and tells the women that they must distract some customs officials while José keeps watch.

Micaëla, with the help of a guide, arrives at the hideout, hoping to save José. Just when she sees him, he fires on Escamillo, who is also approaching the camp. The bullfighter is looking for Carmen, having heard that she is dissatisfied with her latest lover. Enraged, José nearly kills the bullfighter in a knife fight, which Carmen and the smugglers luckily interrupt. Unfazed, Escamillo invites Carmen and the others to his next bullfight in Seville and takes his leave. Micaëla confronts José, tells him that his mother is on her deathbed, and begs him to come with her. He agrees, but only after vowing to Carmen that he will return.

Scene Two
The day of the bullfight has arrived, and a resplendent Carmen walks to the stadium on Escamillo's arm. Haggard and desperate, José emerges from the crowd and declares his undying love to Carmen. She laughs at him, throwing the ring he once gave her into the dirt. His mind clouded with rage, José stabs Carmen to death and collapses on her body, as cheers for the triumphant bullfighter rise from the stadium.