A bedchamber in Siegfried's family castle. In his dreams, the Prince imagines someone is tormenting him. Suddenly a strong gust of wind blows open the window and it shatters. In fright, the Prince awakens. A human figure can be seen in the window frame – it is the Evil Genius von Rothbart; he is hunting for the Prince's soul. Troubled by anxious premonitions, Siegfried loses consciousness.
A luxurious inner courtyard at the castle. Prince Siegfried is celebrating his coming of age. Courtiers are banqueting at the table, and noble young people divert the Prince with their dances. Here there is also the ardent Jester, and the loyal and faithful Benno. Everyone wants the celebrations to succeed. At the height of the merriment, the Jester and Benno announce that the Prince's mother has decided to attend the festivities. All prepare to meet the Sovereign Princess with respect. She tells her son that she wishes him to marry and that the next day there will be a grand ball at which the Prince must select a bride. When his mother leaves, the despondent Prince laments to his friends that soon the end of his freedom will come. The retinue revives its merriment. During the final dance with cups, among the guests Siegfried suddenly recognises the figure that appeared to him that evening in the window. It's as if the Evil Genius is following the Prince, appearing in different places and humbly bowing to him. The youth is left in confusion. Night falls. The festivities have been a success, but Siegfried is sad. Benno suggests the Prince dispel his melancholy by going hunting. The Prince's mentor gives him a crossbow. Siegfried orders the hunt to commence. When all depart, the Prince notices birds landing in the distance and hastily heads towards the flight of swans.
A low-lying location, surrounded by woods on all sides; not far away the lake glistens in the moonlight. By the lake, the ruins of the village chapel grow dark. The Prince's friends appear; they are ready to start the hunt. The perturbed Prince runs in; among the ruins he glimpses the one because of whom he has known no peace for a long time. Trying to hide his alarm from his friends, the Prince sends them off to hunt. At this time the flock of swans swims across the lake, the flock headed by a swan wearing a crown. Siegfried aims his crossbow in order to shoot, just as a girl appears from amidst the ruins of the chapel. It is Odette, the Queen of the Swans. The Prince is amazed by this transformation. Odette begs him not to shoot and relates the sad story of her life. At the will of the Evil Genius she and her friends have been transformed into birds. Only at night near these ruins can the swans take on human form, but their terrifying master – the sinister von Rothbart – follows them persistently. The spell can only be broken by one who loves Odette with selfless and self-sacrificing love. The Prince swears that from now on he will shoot no more birds. Enchanted by Odette's beauty, he makes her another promise – that of eternal love. Siegfried and Odette are surrounded by the swans and, together with them, rejoice at their happiness. Hiding in the ruins, von Rothbart overhears the lovers' conversation.
In the Sovereign Princess' castle's grand hall, everything is ready to receive the guests. The master of ceremonies announces their arrival. Pretenders to the Prince's hand enter, but Siegfried cares nothing for what is going on: all his thoughts are of Odette. The fanfare of a trumpet is heard and a new guest appears. It is Count von Rothbart with his daughter Odile and a large retinue. Siegfried is amazed at Odile's resemblance to his beloved Odette. He decides that this is the swan-maiden who has unexpectedly arrived at the ball, and he greets her in delight. As the Prince and Odile are dancing Odette appears at the window as a swan, attempting to warn the Prince of the Evil Genius' perfidy, but the enamoured Prince sees and hears no-one other than Odile. The Sovereign Princess, seeing her son's interest in von Rothbart's daughter, declares that she will become Siegfried's bride. Von Rothbart asks the Prince to make a solemn declaration of his love for Odile, something he is ready to do. Von Rothbart repeats his question three times, and all three times the Prince replies in agreement. Suddenly the hall is plunged into darkness and Siegfried sees Odette at the window. In horror he realises that he has been cruelly tricked, but acknowledging his guilt has come too late. His oath has been broken and the swan-maiden will forever be at the mercy of dark powers. Von Rothbart and Odile vanish. In despair, the Prince rushes to the lake of the swans.
Night. The banks of the lake of swans. Odette's friends are sad, awaiting her return. Odette runs in, in tears and despair: the Prince did not pass the trial and broke his oath. Siegfried appears. In confusion and grief he seeks Odette in order to beg forgiveness from her. Her friends try to convince her to fly away from here forever, but Odette decides to meet with Siegfried one last time and asks that they be left alone. Odette has forgiven the Prince, but the joy at their meeting does not last long – the appearance of von Rothbart and his retinue of black swans reminds them of the irredeemability of what has passed. Odette bids farewell to Siegfried: due to the vow he has broken she will die before dawn. But the Prince prefers death rather than being separated from his beloved: in a fit of noble rage he attacks the Evil Genius. They are unequal in terms of strength and the Prince dies.
Day breaks. The Prince's friends rush to the lake, having sought him all night. Siegfried is dead. His death is bitterly lamented by Benno and his friends mourn. They do not see how, in the distance, rising above the old ruined chapel, the souls of Odette and Siegfried, no longer controlled by evil powers, fly off into the Chapel of Eternal Happiness.