The action takes place in Seville. Don José, who was training for the priesthood in his native Basque country, killed a man in a quarrel and has had to enlist in the army in Seville. His mother and Micaëla, who loves him and hopes to marry him, have followed him to the south and live in a village near the city.
A square in Seville
While Moralès and his soldiers are chatting about the passers-by, Micaëla comes looking for Don José, a corporal. Moralès explains that Don José is in another company that will shortly take over the guard, but Micaëla decides not to wait. The new guard led by Zuniga arrives, followed by a swarm of children. Moralès tells Don José that Micaëla was asking for him. While Zuniga is curious about the tobacco factory women who work nearby, Don José is uninterested.
The cigarette women come out of the factory for a break. Carmen attracts most of the attention, but she tells the men that she will love only someone who does not love her. She tosses a flower to Don José who, perturbed by the gesture, quickly hides it. Micaëla returns with a letter to Don José from his mother in which she forgives him his crime and asks him to return to marry Micaëla.
Uproar in the factory spills out into the square as Carmen and another woman quarrel. Carmen insolently refuses to answer for her fight, so Zuniga orders her to be imprisoned. Don José is left to guard her, but she promises to love him if he helps her escape. Don José lets her go and is himself arrested.
Lillas Pastia’s Tavern
Carmen, Frasquita, Mercédès and the gypsies are dancing. The victorious torero Escamillo arrives with a crowd of admirers. He is drawn to Carmen but she shows no interest. The crowd and soldiers leave.
The smugglers Remendado and Dancaïre try to enlist the help of Carmen, Frasquita and Mercédès in some of their plans. Carmen refuses: she is in love and waiting for Don José. Incredulous and mocking, the men suggest she brings Don José with her. Having been released from prison, Don José arrives and Carmen dances for him. When he responds to the summons back to barracks Carmen accuses him of not loving her. In answer, Don José describes how in prison he treasured the flower she threw at him. If he really loves her, Carmen says, he will desert the army and go with her to the mountains. Zuniga reappears to meet Carmen and he discourages Don José. They fight, but when Remendado and Dancaïre disarm Zuniga, José decides to join the smugglers, leaving behind his former life.
In the mountains
The smugglers rest while a safe route to Seville is reconnoitred. Don José is still obsessed with Carmen; she, however, is tired of him but senses that he may kill her if she leaves him.
Frasquita and Mercédès read their fortunes in the cards; when Carmen joins them she only turns up cards that foretell her death. Dancaïre and Remendado return, and the gypsy women leave, enthusiastic at their task of distracting the customs officers who have been spotted on the smugglers’ route. Don José is left to guard the contraband.
Micaëla comes alone looking for Don José. A shot frightens her and she hides; it was Don José firing at an intruder: Escamillo. Having heard that Carmen no longer loves her soldier, Escamillo has come after her. Enraged at this, Don José appears and challenges Escamillo to a fight. They are interrupted by Carmen herself. Escamillo invites the assembled company to his next bullfight in Seville and leaves. Still jealous, Don José threatens Carmen.
Micaëla is discovered in hiding. She begs Don José to return to his mother, who is calling for him. Carmen urges him to go. He is suspicious of her motives for encouraging him, but when Micaëla reveals that his mother is dying and wants to forgive him, he agrees to return with her. Escamillo is heard in the distance.
Outside a bullring in Seville
A crowd has gathered to watch the procession before the bullfight. Escamillo is accompanied by Carmen. Her friends Frasquita and Mercédès warn her that Don José is in the crowd. She decides to wait and talk to him, but when they meet he pleads with her to go away with him. She will not, as she no longer loves him. As the crowd is heard cheering Escamillo’s success at killing the bull, Carmen confesses she now loves the torero and returns Don José’s ring. He kills her.