In a cavern in deep wilderness, Mime the dwarven smith is forging a sword. He is frustrated: no matter how good a sword he forges, his young "ward" Siegfried breaks every one of them. There is only one sword Siegfried could not break: Nothung the enchanted. But Mime cannot forge it anew. In his monologue we learn that he wants Siegfried to slay Fafner (who is now a dragon) so he could get the Ring.
That's when Siegfried arrives, riding a bear he has tamed: Mime is scared stiff. Siegfried asks for a sword and Mime hands him his latest piece of forging. Siegfried lets the bear go and studies the sword, but he breaks it saying that a sword must be hard and firm, not a puny pin. Siegfried also refuses the food Mime offers him, saying he has roasted meat for himself. Next he makes an inquiry about his parents: he saw that all animals have two parents, and Mime cannot be his since he looks so different. Pressed hard, Mime finally tells him he found his mother as she gave birth to him in the wilderness and died. He says he does not know Siegfried's father's name (this claim is obviously untrue, see later). Finally Mime shows Siegfried the fragments of the sword Nothung as a proof of his tale. Siegfried tells him to forge Nothung again so he can leave Mime forever. He exits, telling Mime to be ready when he is back.
Mime is alone, worrying about his plans which do not seem to work, as Wotan enters, disguised as "Wanderer". Mime is terrified: he wants to get rid of "Wanderer", but Wotan stubbornly sits down and challenges Mime to a riddle game. Wotan wagers his head and Mime is to ask three riddles - he must answer all three correctly to redeem his head.
First Mime asks the name of the race that dwells in the earth's depths. Wotan answers correctly Nibelungs. The next question is the name of the race that dwells on the earth's face - the Giants. Mime's last question is which race lives high in the clouds, and Wotan answers correctly: the gods. As he tells Mime about them, he by "mistake" lets his Runespear knock the ground: there is thunder and lightning - Mime cowers. Now "Wanderer" tells that since he wagered his head, Mime should have asked things he needed to know instead of such meaningless riddles. Now Mime must answer to three riddles of his or Mime's head is his! First "Wanderer" asks the name of the race Wotan oppresses though he loves them very much. This Mime knows, it is the Volsungs. Next he asks the name of the sword Siegfried must wield to slay Fafner. Mime answers correctly and here we also learn that Mime is fully aware of who Siegfried is and who his parents really were. Wotan's last riddle is: who will forge Nothung anew? This Mime cannot answer: he cannot forge Nothung anew, so who can? As Mime panics, "Wanderer" leaves, having won Mime's head. He also says that one who knows no fear shall forge Nothung anew and that he leaves Mime's head to him who has never felt fear.
Mime is left alone in utter horror. His wild imaginings take over, and as Siegfried's figure shadows the cavemouth, he thinks it is Fafner who has finally come for him and screams in terror. Siegfried comes back to ask for Nothung, but Mime answers him that he cannot forge Nothung. Mime says there is one more thing Siegfried should learn: the meaning of fear - he promised Siegfried's mother (he says) he would teach young Siegfried the meaning of fear. He cannot teach Siegfried, but he knows one who can: Fafner. All right, says Siegfried, after I have seen this Fafner, I will leave you forever.
Siegfried decides to forge Nothung himself. As he forges the sword, Mime brews a drugged potion for him. Mime is happy again, he can see the fulfillment of his plans. The act ends with one mighty blow by Siegfried's Nothung, cleaving the anvil in two.
Next:Siegfried, Act II