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Baron Mirko Zeta, the Ambassador and leader of the Pontevedrian delegation, is engaged in the role of statesman and host. His lovely wife, Valencienne, is perched in a nearby alcove with Camille de Rosillon, a young, handsome aristocrat.

As Camille expresses his love for her, writing “I love you” on her fan; Valencienne warns the young man about “playing with fire.”

Valencienne’s husband, Baron Zeta, hasn’t a clue. His attentions are focused on the stupendously wealthy widow, Anna Glawari, and his fears that she might be persuaded to marry a foreigner. The wrong choice of husband could put the entire country in jeopardy, as Pontevedro’s banking system relies on the widow’s millions.

Anna arrives at the embassy party with her entourage. Suitors begin to buzz around her, but Anna is no fool: She realizes the main attraction is her late husband’s money.

Dashing Count Danilo Danilowitsch arrives, accompanied by dancing girls from the famous Maxim’s. He has been summoned for a serious purpose, and Danilowitsch sings of the hard life of a high-profile diplomat before seizing a quick nap.

Years before, Danilo was desperately in love with Anna, but his family wouldn’t permit them to marry. Tonight, the Count’s snoring attracts the attention of Anna. This leads to a bittersweet exchange about their former romance.

Baron Zeta, taking him aside, appeals to the Count’s patriotism: It is his duty to marry Anna and keep her sizable assets in Pontevedro. This flock of foreign suitors poses a threat to the nation’s financial stability. Danilowitsch refuses to propose marriage, but consoles Zeta by offering to do his best to keep the foreign gold-diggers away from the widow.

A “Ladies’ Choice” is announced and Anna is inundated with eager partners. Only one man ignores her, and she approaches Danilowitsch to ask him to dance. The Count declines Anna’s invitation, yet, moments later, offers to sell the honor to any gentleman in the room willing to make a large donation to charity. The suitors begrudgingly step aside for Danilo and Anna as they make their way to the dance floor.

As the guests enjoy a raucous party with entertainers performing traditional Pontevedrian dances, Anna breaks into song about a lovely forest nymph and the hunter who loves her. Danilo arrives and is confronted by Baron Zeta, who has found the fan with the words, “I love you.” Danilowitsch confirms the handwriting as that of the French aristocrat, Camille de Rosillon, who is rumored to be in love with a married woman. The Prince offers to find out which of the ladies can claim the fan.

Anna, meanwhile, accuses the Count of trying to avoid her, a charge Danilo denies. This provides Anna with a perfect excuse to tell yet another tale: The story of a silly horseman who is blind to the advances of a beautiful young maiden.

Baron Zeta sets up an emergency meeting in the summerhouse with Danilo and his aide, Njegus. Zeta’s wife, Valencienne, is still trying to cope with Camille, her love-struck suitor. She finds her missing fan and tells Camille that they must break-off their friendship in order to allay her husband’s suspicions. When Camille begs for a keepsake, Valencienne presents him with the fan on which she has written, “I am a highly respectable wife.” However, she is also persuaded to join Camille for one last rendezvous in the summerhouse.

Unfortunately, Zeta is headed in the same direction and is shocked to get a glimpse of his dutiful wife with Camille. The Baron’s aide, seeking to avert a genuine disaster, slips Valencienne out the back door and puts Anna in her place. The wife’s honor is secured, but in order to make the story more plausible, Anna announces her engagement to Camille.

The Baron is aghast – the Merry Widow’s millions will now go to a Frenchman and Pontevedro will be ruined. Danilo is stunned and furious. He sings a song about a princess who repays her lover’s discretion by giving her hand to another. The Count then storms out and Anna is left with the happy realization that her one true love truly loves her in return.

Baron Zeta discovers it was his wife, Valencienne, who was dallying with Camille that night in the summerhouse. The telltale evidence is the fan. Valencienne smooths things over with her husband by pointing out her handwritten words: “I am a highly respectable wife.”

The Baron’s suspicions are finally put to rest.