Scene I - Antechamber of the Pontevedrian Embassy in Paris, 1905
A ball is to be held at the Embassy to celebrate the birthday of the Grand Duke, the sovereign of Pontevedro. Secretaries Kromow and Pritschitsch are keen to leave their desk work and join the festivities. Camille de Rosillon, Attaché of the Embassy, is also very anxious to leave work. However, before they can leave, the private secretary to the Ambassador, Njegus, arrives and instructs the three men to return to their work to take care of some important documents he is carrying. As Njegus realizes that Count Danilo Danilovitsch is not there, he enquires where he is, and the others comment that Danilo is out drinking. Njegus sits at Danilo's desk, and informs them that Pontevedro is bankrupt. Baron Mirko Zeta, Ambassador of Pontevedro in Paris, arrives carrying a telegram stating that the richest Pontevedrian widow, Hanna Glawari, is to attend the Embassy ball. The Baron wants Count Danilo to marry the widow to save the country from bankruptcy with her money. Valencienne, the Baron's wife, comes into the room and they all drink to the health of the Grand Duke. They all leave, except for Camille, who has some extra paperwork to do. Valencienne has lagged behind the rest in order to be able to flirt with Camille, her lover, trying by all means to seduce him and distract him from his work. Njegus returns without being seen by the lovers and surprises them kissing. Valencienne begs him to keep the secret. When Njegus remains alone, Danilo comes in, just arrived from chez Maxim's completely drunk. He can hardly stand. Baron Zeta and Valencienne come in and inform him that he must marry the widow. They also order Njegus to get him sober before the ball.
Scene II - Grand ballroom of the Embassy
The guests arrive. The ball begins. The Baron dances with his beautiful wife as long as his rheumatism allows it. Then he asks Camille to replace him in the waltz. He accepts enthusiastically under the gaze of Njegus, upset by the clear demonstration of affection of both as they dance. The arrival of Hanna Galwari, the wealthy widow, is announced, and all hopeful young bachelors play compliments to her. Baron Zeta introduces her to Count Danilo. They are both stunned to see each other, realizing they had had a romance in the past. In a burst of enthusiasm, Danilo tells her that he loves her and she accuses him of only wanting her money. Upset about this, Danilo takes a red kerchief out of his pocket to wipe his sweat. Hanna recognizes it as a keepsake she had given to Danilo the last time they had seen each other, and recalls that Danilo's aristocratic uncle had opposed to their romance and had forbidden Danilo to marry Hanna, because Hanna was a poor girl back then. Hanna takes back the kerchief from Danilo and then leaves the room. As he remains alone, Danilo remembers Hanna the way she used to be, as a simple charming girl, and he recalls with fondness the way she had given him the kerchief. He returns to the ballroom and it is time for the "ladies choice" dance. Hanna chooses Danilo to dance with, but he is still upset and dances with another lady. Feeling hurt because of Danilo's actions, Hanna dances with Camille, which annoys Valencienne. Jealous Valencienne asks Danilo to dance with her. At some point, there is a change of partners, Valencienne and Camille escape together and Hanna and Danilo end up unintentionally dancing together.
Act II - In the gardens of Hanna's house
The following night, Hanna hosts a party in the gardens of her Parisian villa, and she and all her guests wear typical Pontevedrian clothes and celebrate the anniversary of the Grand Duke in the Pontevedrian fashion. There are many Pontevedrian folk dances, including one which Danilo and Hanna dance together, and at the end of which Hanna wipes her forehead with the red kerchief. Later, Hanna returns the kerchief to Danilo in exactly the same way as she had given him the kerchief before they had been parted by Danilo's aristocratic uncle's command. Valencienne and Camille agree to meet at the garden pavilion. Arriving for a meeting with Baron Zeta and Danilo, Njegus witnesses what happens and starts peeping though the keyhole. The Baron and Danilo arrive and ask him who he is watching. He quickly locks the door and the other two ask him to open it. Njegus refuses to do so. He argues with them and escapes. Seeing Hanna, Njegus explains the awkward situation to her and asks her to change places with Valencienne in the pavilion. Hanna agrees to do so. Baron Zeta and Danilo catch Njegus, and demand that he hand them the key. Njegus puts the key in his mouth, and the others shake him until they get the key. Meanwhile, Hanna changes places with Valencienne through a hidden door in the pavilion, and Valencienne leaves the pavillion and joins the group of guests appearing innocent. The Baron opens the door, and Camille leaves, followed by Hanna. Danilo is surprised to see that Hanna is Camille's lover. Hanna communicates everyone that they are engaged. Camille is startled at the announcement and Valencienne faints with shock. Baron Zeta, horrified by what is happening, faints. Danilo is furious. Hanna explains to Camille why she did it and he feels relieved. Baron Zeta, Valencienne and Njegus leave in a huff. All the guests congratulate the new couple, dissatisfied for not having been able to save Pontevedro from bankruptcy. The jealous Danilo throws down the red kerchief and storms off. The delighted Hanna then picks up the kerchief, confirming that Danilo truly loves her.
Act III - Chez Maxim's, famous Parisian restaurant
The maître d'hotel is welcoming his distinguished patrons as they arrive, and the waiters are serving tables. Camille arrives. Shortly after, Baron Zeta, Valencienne and Njegus arrive, and they congratulate him. With the fear that Pontevedro would become bankrupt as a result of Hanna's marriage to a non-Pontevedrian, as her wealth would pass to her husband's hands, Njegus lowers the Pontevedrian flags. Danilo arrives and shows aggressive against Camille. The two men fight. Then Hanna arrives at the restaurant, Camille reaches her and offers her his arm. Danilo wants to slap him with his gloves and challenges him to a duel. At the sight of Valencienne's reactions, Baron Zeta finally realizes what is happening between his wife and Camille. Resigned but happy, he accepts this, and the three leave together. Hanna is left alone in the room, feeling rejected. Then Danilo returns and folds Hanna in his arms, and all ends in blissful happiness. Njegus is delighted at the outcome and raises the Pontevedrian flag in celebration.