On the coast, a community makes a precarious living from the dangerous seasonal work of diving for pearls. When Zurga tells the people that they should choose a leader, they all swear absolute loyalty to him.
Nadir arrives and is recognised by Zurga as his former friend. They remember how, on their travels together, they had both fallen in love with a priestess they encountered in a temple. For the sake of their friendship, they vowed to each other to give up any thought of a relationship with her. Now, they reaffirm their bond of friendship.
The community’s high priest, Nourabad, presents a priestess whose singing will pacify the spirits of the sky, land and sea during the current fishing season. This priestess – Leïla – is the woman with whom Zurga and Nadir were in love. She swears an oath of chastity on pain of death. Her reward for keeping the divers safe from harm will be their finest pearl. After Zurga outlines the dire consequences should she fail to keep her vow, Leïla recognises Nadir.
Nadir admits he was unable to suppress his desire for Leïla and returned to the temple to hear her song. He has continued to admire her from afar. Now hearing her song again, he approaches her, and she reveals herself to him.
Nourabad tells Leïla that all the fishermen have returned safely from the sea and that she can now sleep soundly until morning. He says she has nothing to fear as long as she keeps her vow. As proof of her steadfastness, she tells him how, when she was a small child, she helped a fugitive hide from his pursuers, not revealing his whereabouts even when she was threatened with death. In remembrance of her bravery and kindness, the man gave her a necklace.
Leïla falls asleep, her thoughts full of Nadir. He makes his way to her sanctuary and together they reminisce about the night they first met. They acknowledge their mutual love. As he departs, promising to return the following night, a violent storm breaks and the couple are discovered. Nourabad denounces them for their sacrilege before the assembled crowd, who demand their deaths. Zurga intervenes to protect his friend, and urges the couple to make their escape. But when Nourabad rips off Leïla’s veil, Zurga realises that Nadir has betrayed their oath of friendship and, furious, orders the couple’s execution.
Both the storm and Zurga’s anger have abated. He is ashamed of his behaviour, and wants forgiveness of both his friend and the woman he loves.
Leïla is brought to him and he is overwhelmed by her beauty. She pleads for Nadir’s life, but succeeds only in rekindling Zurga’s jealous fury when he realises how deeply she loves his friend and rival. As she is taken away for execution, she hands over her necklace to be sent to her mother. Examining it, Zurga realises that Leïla was the child who, years before, saved his life when he sought refuge.
The community prepares for the ritual deaths of Leïla and Nadir. At the last moment Zurga stops them with the news that their encampment is on fire. He has started the fire to provide Leïla and Nadir with the opportunity to escape. Zurga is left alone to meet his fate.