In a public square in Seville, soldiers watch people coming and going. Micaëla arrives looking for Don José, but is told that he is not there and leaves. Don José and Lieutenant Zuniga arrive with the new guard, followed by a group of street children. At the sound of the noon bell, girls from the nearby cigarette factory wander in to smoke and chat. Carmen enters flirting and joking, and explains her philosophy of life: love is a wild bird that cannot be tamed. Carmen tosses a flower at Don José as the work bell calls the girls back. Micaëla returns to give Don José a letter from his mother. As she leaves, a disturbance is heard in the factory: Carmen has wounded another girl in a fight. Zuniga orders Don José to arrest Carmen, but when they question her, she nonchalantly resists. Left alone with Don José, Carmen seduces him. Falling under her spell, he allows her to escape and is arrested for doing so.
– Intermission –
A month later at the inn of Lillas Pastia, Carmen joins her companions in a song to distract the soldiers from the gypsies’ illicit smuggling of arms from that same inn. She then exerts her charms on the famous toreador Escamillo, who boasts of his exploits in the arena. She learns that Don José was demoted because of her escape and sent to prison, from where he was just released the day before. Carmen tells her accomplices that her feelings for Don José keeps her from going along on there next smuggling trip. They leave when Don José is heard approaching, urging the two of them to join them later. Alone together, Don José declares his love for her and Carmen tells him that she is indebted to him. But when a horn sounds, signaling that the soldiers must return to the barracks, Don José says he must leave. Carmen invites him to join her gypsy life, but he says no. Suddenly, Zuniga bursts in and orders Don José to leave but he refuses. Before their fight progresses, the smugglers return and disarm Zuniga, who is taken prisoner. Don José has no choice but to flee with Carmen
– Intermission –
Late at night in a deserted place in the mountains, the smugglers carry their goods and discuss the perils of smuggling. Carmen’s love for Don José is already fading and the two resume an ongoing fight. Frasquita and Mercédès try to read their fortunes in the cards, but when Carmen joins in, her cards foretell only death. As the smugglers leave, Micaëla arrives looking for Don José. Spying Don José just as he is firing his gun, she takes cover and hides. Escamillo emerges, the bullet having barely missed him, and reveals that he has come in search of Carmen, whom he loves. Their resulting fight is halted by the return of the smugglers, who Escamillo invites to attend his next bullfight in Seville. After Escamillo departs Micaëla is discovered and she immediately tells Don José that he needs to return to his mother as she is dying. As Don José rushes off with Micaëla, Escamillo’s voice is heard again in the distance.
Outside the bullfighting ring in Seville, the crowds gather, hailing Escamillo. Carmen is with him and assures him of her love. As the throng proceeds into the bullring, Frasquita and Mercédès warn her that Don José is somewhere in the crowd. Carmen says that she is not afraid and stays behind to confront him. He finds her and pleads with her to start a new life with him. Carmen tells him that all is over between them and declares her love for Escamillo. Enraged, Don José stabs Carmen, falling in despair over her body.