On the shores of Ceylon, the pearl fishermen meet and choose Zurga as their king. The hunter Nadir appears after a year away in the forest. The two men recall when they had fallen in love with the same woman but renounced her for the sake of their friendship, and they vow never again to let a woman divide them.

A boat arrives carrying a virgin priestess who has come to protect the village from storms and other evils. The high priest Nourabad instructs the veiled priestess of her duties of prayer and chastity and the fatal penalty for violating them. The priestess recognizes Nadir, who realizes that she is Leïla, the woman whom he and Zurga both loved and forswore. As Leïla begins her isolated prayer vigil, she hears Nadir admit his love for her and her prayer becomes a love song.

Nourabad reminds Leïla to remain faithful to her vows. She tells him how she once protected a refugee, refusing at knifepoint to betray him to his pursuers, and shows him the pearl necklace he gave her as a reward. After Nourabad leaves, Nadir appears. Leïla warns him that if they are discovered they will both lose their lives. But they cannot help confessing their mutual love, and Nadir promises to return and take Leïla away with him.

Villagers discover Nadir leaving their priestess’s sanctuary and they demand revenge upon both of them. But Zurga, their king, decrees that Nadir and the priestess be spared and secretly urges the couple to escape. When Nourabad removes Leïla’s veil, Zurga recognizes her and realizes Nadir’s betrayal and sentences them both to death.

Recalling his friendship with Nadir and his love for Leïla, Zurga reconsiders their death sentence. Leïla appeals to Zurga to spare Nadir, but her devotion only stirs his jealousy. Just then, Zurga notices Leïla’s pearl necklace and seizes it.

The villagers prepare Nadir and Leïla’s funeral pyre as the two lovers ready themselves to die. Suddenly, Zurga warns his people that their village is ablaze, and they hurry off to save their homes. Alone with Nadir and Leïla, Zurga tells them that he himself set the fire in order to save them. He has recognized Leïla’s necklace as the one he once gave to his own rescuer, and he pays his debt by allowing them to escape as he remains to await his own fate.