At the bottom of the Rhine, the Rhinemaidens guard the dormant Rhine gold. The black elf Alberich preys on the permissive mermaids. They ridicule the lustful Nibelung dwarf and awaken the gold with their gambolling, by whose bright light they reveal to Alberich that it can be forged into a ring which would permit its wearer to seize world dominion, in exchange for foreswearing love forever. The spurned Nibelung does not hesitate, curses love and guesses the magic formula which forces the gold into a ring.

Amidst cloudy heights, the light elf Wotan dreams of the same power, but the god would never forego amorous trysts. At his wife Fricka’s request, he has ordered the giants Fasolt and Fafner to build a castle for the gods where Fricka hopes to tie her notoriously philandering husband down. Now, however, as the castle is finished and the giants approach to demand their payment, she scolds him. After all, Wotan has promised them Freia, Fricka’s sister, in payment. While Fasolt desires Freia, his brother Fafner is counting on the downfall of the gods, whose wellbeing depends on the golden apples which only Freia, the goddess of love and eternal youth, knows how to cultivate. In order to save himself and the clan of the gods from this plight, Wotan has already commissioned cunning Loge, the demigod of fire, to search for an alternative reward for the giants. When Loge finally arrives, he tells everyone that the Rhine gold has been stolen. For Alberich’s gold, the giants are willing to forego Freia; in the meantime, they carry her off as ransom. Wotan and Loge set out for Nibelheim to wrest the Rhine gold from Alberich.

In underground Nibelheim, Alberich forces the Nibelungs to bring him more gold from the mines. He has also commanded his brother Mime, a skilful blacksmith, to make him a magic helmet, bestowing the wearer with the ability to make himself invisible and transform into all kinds of figures. When they arrive, Wotan and Loge first encounter the mistreated, whining Mime, who tells them of Alberich’s enormous power. During their inimical encounter with Alberich, Loge cleverly entices him to demonstrate the magic helmet. Alberich is asked to appear to them as a huge snake, then as a small toad – a creature easily captured by Wotan and Loge.

Back on their cloud-festooned mountaintop, they force the captive to buy his freedom with the Nibelung’s treasure and the magic helmet. When Wotan also demands the ring from him, Alberich warns the keeper of divine laws against such outrageous robbery. Wotan, however, tears the golden band from him, whereupon Alberich curses it. The giants return with Freia and demand that her ransom must cover her entirely with gold. This requires the entire hoard and even the helmet, and when Fasolt catches a glimpse of Freia’s eye through a crack, they also demand the ring from Wotan’s finger. Wotan, however, refuses, and therefore the giants prepare to take Freia off again. At this point, Erda, the omniscient earth mother, emerges from the depths, warning Wotan against the accursed ring. Worried, he heeds her advice, immediately witnessing how Alberich’s curse is fulfilled: during their argument about the ring, Fafner kills his own brother and makes off with the hoard. Donner clears the murky air with a storm, and Froh creates a rainbow bridge to the castle of the gods now theirs, which Wotan names Valhalla. As the Rhinemaidens lament the loss of the gold, the gods ceremoniously take possession of Valhalla, but Wotan steals away to stop the demise of the gods foretold by Erda.