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Corporal Morales and the soldiers while away the time watching the passers-by, among shom is Micaela, a peasant girl from. Navarre. She asks Morale sif he knows Don Jose. Avoiding their invitation to step inside the guardroom, Micaela escapes. A trumpet call heralds the approach not only of the relief guard but also of a gang of street urchins imitating their drill. As the guards are changed, Morales tells Jose that a girl is looking for him. Zuniga, the lietenant in command of the new puard, question Carporal Jose about the tobacco factory. A stranger in Seville, Zuniga is apprehensive of the dangerous atmosphere of the locale
The factory bell rings and the men of Seville gather round the female workers as they return after their lunch break. The gypsy Carmen is awaited with anticipation. When the men gather raund her, she tells them love obeys no konwn laws. Only one man pays no attention to her Don Jose. Carmen throws a floer at him the women go back into the factory and the crowd disperses.
Micaela returns, bringing news of Jose's mother. She has sent Micaela, who lives with her, to give h,m a letter. Jose feels that his mother is protecting him from afar. When he starts to read her letter, Micaela runs off in embarrassmnet since it suggests that he marry her. At the moment that he decides to obey, a fight is heard from within the factory. The girls stream out with sharply conflicting accouns of what has occurred, but it is cerain that Carmen and of her fellow workers quarreled and that the other girls was wounded. Carmen, led out by Jose, refuses to answer any of Zuniga's puestions. Jose is ordered to tie her and take her to prison. Carmen entices him to go dancing at Lillas Pastia´s tavern outside the wals of Seville. Mesmerized, Jose agrees to help her escape. He unties the rope and, as they leave for prison, Carmen slips away. Don Jose is arrested.
Carmen andher friends Frasquita and Mercedes entertain Zuniga and other officers. Zuniga tells Carmen that Jose has been released this very day. A torchlight procession in honer of the bullfigter Escamillo is heard, and the officers invite him in. He describes the excitements of his profession, in particular the amorous rewards that follow a successful bullfight. Escamillo then propositions Carmen, but she replies that she is engaged fort he moment. He says he will wait. Carmen refuses to leave with, Zuniga, who threatens to return later.
When the company has departed, the smugglers Dancaire and Remendado enter. They have business in hand for which their regular female accomplices are essential. Frasquita and Mercedes are game, but Carmen refuses to leave Seville : She is in love. Her Friends are incredulous. Jose´s song is heard in the distance. The smugglers withdraw. Carmen tells Jose that she has been dancing for his officers. When he reacts jealously, she agrees to entertain him alone.