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In Seville, soldiers and their officer, Moralès, survey the crowd milling about the square. A shy young woman approaches them, asking for Don José. Moralès tells her that he will be arriving soon. Sorry to see the pretty girl go, the soldiers resume their watch.
When José arrives, Moralès tells him that he has had a visitor. José explains to his captain, Zuniga, that Micaëla is his childhood sweetheart. Zuniga is more interested in ogling the women from the cigarette factory, who saunter out for a break. Among them is Carmen, who toys with her many admirers. As she and the other cigarette girls return to work, Carmen throws a flower at the one man in the crowd who has ignored her: José. Micaëla returns and gives José a letter from his mother, which urges him to marry Micaëla.
There is an uproar in the cigarette factory, and Zuniga asks José to investigate. Carmen has fought with and wounded another factory worker. José binds Carmen’s hands as Zuniga goes to write a prison-order. Carmen promises to meet José for a private rendezvous later if he lets her escape. Spellbound, he agrees. With José’s help, Carmen throws her captors into confusion and escapes.
At the inn, Carmen dances and sings a gypsy song with her friends Frasquita and Mercédès. Zuniga mentions that Don José is now out of jail, having served two months for helping Carmen escape. The popular matador Escamillo passes by in a torchlight procession and is soon smitten with Carmen’s beauty. After the inn has closed for the night, the gypsies plan their smuggling activities. José shows up and Carmen is overjoyed to see him. Left alone, she sings and dances for him, but when he hears the military bugles calling him back to his quarters, José prepares to leave. Carmen is furious, but José swears his devotion. Zuniga returns, hoping for a tryst with Carmen, and José attacks his own captain in a jealous rage. Now José has no choice but to desert and join the smugglers.
The smugglers set up camp in the mountains. After several months together, all is not well between Carmen and José. Carmen’s friends tell fortunes with a deck of cards. Carmen joins them, but her cards predict death, first for her and then for José. She deals again, but the message is the same.
Micaëla makes her way into the now deserted camp, sent by José’s mother to persuade him to give up his shameful life. She hides when Escamillo arrives in search of Carmen. When José learns of Escamillo’s amorous intent, the two men fight until Carmen breaks up the duel. Promising to finish the fight later, Escamillo leaves. When Micaëla is discovered, she begs José to return with her. He agrees only when he learns that his mother is dying. José warns Carmen that their paths will cross again.
Outside the bullring in Seville, the procession into the arena begins. Carmen is at Escamillo’s side, swearing that she has never loved another man as much as she loves him. Carmen’s friends warn her that José is lurking in the crowd, but she stays behind to face him. José asks her to start a new life with him, but Carmen insists that all is over between them. His pleading becomes desperate, and he forces her to admit that she is in love with Escamillo. Beside himself with rage, José kills her as the crowd inside acclaims the triumphant matador.