Rusalka's water world. Three nymphs tease the Water Gnome. He tries to catch them, but they mock him and run off laughing. His daughter, Rusalka, confesses that she wants to become human, because mortals have souls which are denied to the fairy world, and because she has fallen in love with a mortal who often swims in the lake. Grieving, but realising that there is no turning back for her, he advises her to consult the witch Jezibaba.
Rusalka calls on the moon to tell her love she is waiting for him, then calls Jezibaba. First giving her the ability to walk on land, the witch asks what she will give to become human. She is unimpressed by Rusalka's offer of all that she has, telling her that she will have to be mute when among humans. She also warns that if her love is not returned, her lover will share eternal damnation with her. Rusalka is confident that her human soul and her love will be strong enough to prevail.
Morning approaches and the Prince's hunting party draws near the lake. The Prince, commenting that the woods are full of magic, sends his followers home and sits by the lake. Rusalka appears before him. The Prince wonders if she is woman or fairy tale and asks if she is kin to the white doe he has been hunting. She is unable to reply. He declares that her lips will at least respond to his kiss. When he asks if she loves him she flings herself into his arms, as her sisters and father lament. The Prince takes her with him.
The Prince's world. The kitchen boy explains to the gamekeeper that the Prince has found a strange creature in the woods and is likely to marry her. The gamekeeper confirms that the woods are full of sinister magic. The kitchen boy worries that the Prince has changed, walks round in a daze, and has resisted the parson's attempts to warn him of danger. The only hope is that he is supposed to be fickle and is apparently turning his attentions to a visiting foreign princess.
They run off as Rusalka approaches with the Prince, who complains that he has yet to fathom her mystery and reproaches her for not responding to the warmth of his passion. The Foreign Princess is jealous of the Prince's love for Rusalka and detaches him from her by reminding him of his duties as her host. They leave to prepare for a ball and the Water Gnome appears, lamenting that his daughter has left her realm and fearing that she will be unhappy.
At the ball the Prince courts the Foreign Princess and neglects Rusalka, who turns to her father lamenting that the Prince has left her for another. Now neither a fairy nor a woman, she can neither live nor die. The Princess rejoices in the change that has come over the Prince now that he is courting her. He swears that he prefers her warmth to Rusalka's pallid coldness, but the Princess taunts him with not knowing which he prefers. When he declares that he loves only her, Rusalka flings herself desperately into his arms, but he pushes her away, terrified by her icy coldness. The Water Gnome pulls Rusalka away and the confused Prince begs the Princess for help against the powers of magic, but she derisively tells him to join his beloved in hell, and leaves.
Many years later. The Prince is on his death bed. Looking back on his life, he recalls his love for Rusalka and imagines what might have happened to her after they split up, and how a final encounter between them might have looked: Rusalka laments her fate, cut off from her sisters and rejected by the Prince. Jezibaba tells her that only the blood of her betrayer can save her, but Rusalka, horrified, throws the knife away and Jezibaba taunts her for her weakness. Rusalka's sisters reject her, since she has been corrupted by the embrace of a mortal.
The three nymphs try to resume their sport with the Water Gnome, but he is too sad to respond to their game. The Prince is looking for Rusalka. She appears in the moonlight and he begs her if dead, to kill him; if alive, to save him. She answers that she is neither living nor dead and now her embrace can only bring him death. She kisses him - and he dies as she begs for divine mercy for him.