Alberich is watching Fafner's cave, Neidhoehle (the "Hate- hole"), for he wants to know where his precious Ring is. Wotan arrives, still posing as "Wanderer", but Alberich sees through his disguise immediately and calls him a shameless thief. Alberich remarks that Wotan cannot kill Fafner himself or else his Runestaff would break and his powers be lost forever and he also boasts about his own schemes of world domination. Wotan answers that Alberich need not mind him: he should worry about Mime instead. He also suggests that Alberich ask Fafner to give the Ring to him. As Alberich hesitates, Wotan wakes Fafner up. Wotan and Alberich tell Fafner about a strong boy with a sharp blade who is coming to kill Fafner, but wants only the Ring: if he gives up the Ring, he will be spared. Fafner ignores their words and goes back to sleep. Wotan laughs at this ingenious prank he pulled at Alberich and then leaves, warning about Mime one more time.
Mime leads Siegfried to Neidhoehle but dares not come near it himself. Even his terrifying descriptions of the Dragon do not scare Siegfried. Mime stays there waiting for Siegfried - Siegfried walks alone toward Neidhoele. He wonders what his mother was like - he has never seen a woman. He sees a beautiful bird - he carves a flute and tries to imitate its singing, but realizes his playing does not sound right. So Siegfried decides to give the bird a few notes from his hunting-horn.
As Siegfried blows the hunting-horn, Fafner comes out of his cave to investigate the noise. He says he wanted a drink and now he has found some food as well. Naturally, Siegfried does not want to end up as the Dragon's meal - he just wanted to "learn the meaning of fear". Fafner takes this to be bravado and a fight ensues presently. It is a brief fight: Nothung pierces the Dragon's heart very quickly.
Fafner, just before he dies, asks his slayer's name and tells his story to the boy. He also warns Siegfried about the evil intents of the one who lead him to Fafner.
Some of the Dragon's blood has been spilled on Siegfried's fingers and as he licks them - i.e. tastes the Dragon's blood - he realizes he can now understand the bird's speech. The bird tells Siegfried to take only the Tarnhelm and the Ring and leave the rest of the treasure (why the bird says this beats me: the bird must have been aware of the Ring's curse. Does the bird wish Siegfried's doom? TY).
Meanwhile, Alberich has reached Mime. They quarrel about to which one of them the treasure belongs. Mime suggests that they split the treasure: Alberich may keep his Ring and Mime gets the Tarnhelm. Alberich refuses: he could never sleep his nights safely if Mime had the Tarnhelm - thus he wants _both_ of the two magical artifacts. But just then Siegfried appears, carrying both the Ring and the Tarnhelm. Alberich curses and hurries off.
Now Siegfried can hear the bird's voice again: the bird warns him of Mime's treachery and tells him that he now can perceive what Mime is thinking in his heart.
Siegfried tells Mime that the teacher has failed: he could not learn the meaning of fear from Fafner. Mime tries to offer Siegfried a drugged potion, but Siegfried can read his mind as if it were an open book. He gets angry and slays Mime with one swift blow of his sword. He throws Mime's corpse in Neidhoehle.
Siegfried asks the bird if the bird knows where he could find a suitable companion. The bird tells him about Bruennhilde, who is lying in deep sleep, surrounded by a magic fire which can be penetrated only by one who knows no fear. Siegfried realizes how stupid he was, trying to learn fear and now follows the woodbird who will lead him to Bruennhilde.
Next:Siegfried, Act III