In the Rhine River, the three Rhinemaidens frolic through the water. Alberich, a Nibelung dwarf, approaches the lovely creatures, hoping to join them, but the Rhinemaidens laugh at his ugliness. As the sunlight from above penetrates the waves, the river's golden treasure is revealed. The Rhinemaidens, guardians of the Rhinegold, disclose their secret: if someone were to renounce love and fashion a ring out of their gold, he would gain the power to win all of the world's wealth. They are confident that nobody would be willing to make that sacrifice, but, angry and rejected, Alberich seizes the opportunity. He curses love, but not lust, and steals the gold from its keepers.

Wotan, king of the gods, is awakened by his wife Fricka. In the distance lies the magnificent Valhalla, a newly-completed fortress that Wotan has had built by two giants, the brothers Fasolt and Fafner. Fricka had begged Wotan to build Valhalla, selfishly hoping that their new home would put an end to his wanderings. Wotan has promised the giants that they could have Fricka's sister Freia, goddess of youth, as payment. Wotan tells her that he has no intention of following through with the bargain. Loge, the god of fire, will help to convince the giants to change their minds. The giants draw near to demand their payment. Fafner knows how highly the gods depend on Freia, for she grows golden apples that bestow eternal youth upon them. Freia's brothers, Froh and Donner (gods of spring and thunder), try to protect her, but Wotan stops them, reminding them that all treaties are guaranteed by the writings on his spear, which include his contract with the giants. When Loge finally arrives, he agrees with the giants that no payment would ever compare to a beautiful woman. He has heard of only one being who has ever renounced love, Alberich, who now stands to control all of the world's power. Fafner tells Wotan that he is willing to accept Alberich's gold in Freia's place. The giants carry her away, promising to return that evening. In her absence, the gods soon begin to lose their youth.

Far underground in Nibelheim, Alberich's workers mine for gold. Alberich has forced his brother Mime to create the Tarnhelm, a magic helmet that enables its wearer to assume any shape. Alberich uses the Tarnhelm to make himself invisible to torment his workers. When Loge leads Wotan into the cavern, Mime tells them that Alberich has forged the magic ring from the Rhinegold, with which he discovers endless supplies of gold. He plans to use his wealth to take control over the world. Alberich returns, suspicious of the intruders. Bragging, Alberich tells them about the Tarnhelm, then demonstrates its power by transforming himself into a fearsome dragon. When Loge asks if Alberich can make himself into something tiny, Alberich takes the shape of a toad. Loge and Wotan quickly seize the creature and take the Tarnhelm away. Suddenly visible in his usual shape, Alberich is tied up as their prisoner.

Loge and Wotan drag Alberich back to the mountaintop, where they demand his gold as ransom. Alberich mutters to himself that he can use the ring to replace any gold that he must relinquish. He summons his workers to bring their hoards. Loge demands that he leave the Tarnhelm behind as well. Wotan sees the ring on Alberich's finger, and asks for that too. When Alberich refuses, Wotan tells him that he has no claim to it, for it was stolen from the Rhinemaidens. Alberich points out Wotan's hypocrisy, but ultimately relinquishes the ring in return for his freedom. Leaving, he puts a curse upon the ring so that it will bring only misery and death to whoever wears it.

Fasolt and Fafner return with Freia. Fasolt demands that the gold be piled up in front of her; the giants will release Freia only when the gold completely blocks her from their sight. Froh and Donner begin the task. After all the gold is stacked, Fafner can still see Freia's hair. He asks for the Tarnhelm too, which Wotan gives up. Fasolt then spies Freia's eyes through a crack in the pile of gold, unwilling to let her go until Wotan's ring is added to the treasure. When Wotan refuses, Erda, goddess of the earth, emerges with a dire warning. She convinces Wotan that he must relinquish the ring, or face certain destruction. As Fafner and Fasolt survey their treasure, they argue over its fair division. When Fasolt takes the ring, Fafner kills him. Wotan realizes that Alberich's curse on the ring has already begun to take effect.

Donner sweeps away the stormclouds and Froh points the way over a rainbow bridge to Valhalla. The gods begin their journey to Wotan's new fortress, as the Rhinemaidens mourn the loss of their gold.

(Synopsis by Mark Lyons)