The Three Rhinemaidens are swimming in the depths of the river Rhine, as Alberich the Nibelung (a night-dwarf) enters. The Rhinemaidens tease him as he tries catch them.
Then a ray of sunlight shines on pile of gold. The Rhinemaidens tell Alberich that if someone should forswear all love, he would be able to forge an all-powerful ring of the Rhinegold. They tell this to Alberich because they think he would never forswear love, as he was so lustily chasing them. But they are wrong: mad with despair, Alberich forswears and curses all love and he steals the Rhinegold and flees before the shocked Rhinemaidens can take any action.
Elsewhere, Wotan (Odin, the chief of gods) has hired two giants - Fasolt and Fafner - build him a mighty fortress. Following the cunning Loge's advice, he promised the giants goddess Freya as payment. Now Freya is fleeing towards Wotan and his wife, Fricka (goddess of marriage), as the giants appear: the fortress is completed and they want their payment. Wotan tries to play time and hopes Loge would appear and find some clever way out of the nasty situation. Donner (Thor) and Froh arrive to protect Freya. Donner is about to swing his hammer at the giants, but Wotan stops him: Wotan's Runespear protects his deal with the giants.
Just then Loge appears in a flickering flame. All gods are angry at him. Loge says he understands the giants' demand - for who could deny a woman's charm? Who except Alberich? And so Loge tells them about Alberich and new might: the Ring and the treasures he has acquired by the power of the Ring. Alberich is a bitter enemy of the giants and the two giants declare that they will take the Nibelung's treasure instead of Freya. As Wotan hesitates, the giants take Freya away and demand their payment be delivered before sunset. The gods suddenly feel weak: Loge knows that this is because Freya normally gives them Golden Apples which bestows them their eternal youth - no Freya, no Apples. Loge suggests that Wotan should take the Ring from Alberich, since it does not belong to him: steal from the thief. Left with little choice, Wotan agrees to try to win Alberich's treasure. He tells Loge to lead him to Nibelheim, but not through the river Rhine (possibly because he does not want the Rhinemaidens to see him, as he does not intend to return the gold to them but keep it).
Incidentally, the Rhinemaidens may be his daughters, although there is no evidence whatsoever in the text that Wotan is the father they referred to.
Meanwhile, in Nibelheim, Alberich has forced his brother, Mime, forge a magic helmet called the Tarnhelm, which enables its wearer to change shape and to become invisible (it also grants its wearer the ability to teleport, but this will be revealed much later). Mime has hidden the Tarnhelm, hoping to steal the Ring with its help, but he fears Alberich's might too much and gives the helmet when Alberich asks for it. Alberich wears the Tarnhelm and turns invisible - and beats poor Mime up.
Alberich has just left when Loge and Wotan arrive. They hear latest news from Mime and Loge promises Mime they will free all Nibelung dwarfs from Alberich's tyranny. Alberich arrives and becomes visible. He recognizes Wotan and Loge immediately and asks what is their business here. He is told that the gods have heard of his new might and wanted to see if the rumours are true. Alberich boasts with his great treasures with which he says he will rule the world. Loge pretends disbelief in the Tarnhelm's powers, and to prove its might, Alberich wears the Tarnhelm and turns into a huge dragon (serpent?). Loge pretends to be frightened, and asks next whether Alberich could turn into something tiny to evade his enemies. Alberich doesn't see the trick and turns into a toad. Loge tells Wotan to catch the toad: the gods seize the Tarnhelm and leave Nibelheim with Alberich as their captive.
Wotan demands that Alberich pay all his treasures as a ransom before he can be freed. Alberich summons the Nibelungs and they pile all his treasures. Loge also places the Tarnhelm on the pile, Alberich is furious, but tries to calm himself with the knowledge that Mime can forge a new magic helmet. But then Wotan demands the Ring as well. He proceeds to take it and lets Loge free Alberich. Crushed, Alberich places a powerful curse on the ring: whoever has the Ring will be its slave and is doomed, he will be envied and hated by others - everyone will covet for the Ring. With these words he leaves. Wotan ignores his words.
The giants return with Freya. They demand that the treasure must fully cover Freya before they are satisfied. After all gold has been used, her hair can still be seen: the Tarnhelm must cover that. Even then, Fasolt claims he can still see Freya's eye - but he can also see a golden ring on Wotan's finger: he wants it too. Wotan refuses abruptly. The giants say the deal is off.
Just then, bathed in blue light, a woman appears and tells Wotan to surrender the Ring and thus evade its dread curse. She introduces herself as Erda the Earthmother and tells the gods she has seen a dark day dawn for the gods: the End of Everything. Then she disappears. Reluctantly, Wotan follows this piece of advice and gives the Ring to the giants.
Immediately, the giants start a fight over how to divide the treasure. Fafner kills his brother Fasolt, and gets all the treasure. The power of the curse horrifies Wotan. After Fafner has left, the gods turn to greet their new home. Donner summons a lightning bolt to clear away the fog and a Rainbow Bridge spreads out. Wotan is silent for a moment, as though seized by a novel idea. He christens the fortress Valhalla.
As the gods are walking the Rainbow Bridge to Valhalla, Loge stays behind them and remarks (aside) that they are merely hastening to their own end and he would welcome the day he can turn again into his elemental (form) and burn everything. Then, distant singing can be heard: the Rhinemaidens mourn their lost gold. Wotan bids Loge tell them to be silent - but they won't be silenced. The gods ignore the Rhinemaidens and enter Valhalla.
Next:Die Walkure, Act 1