The courtyard of the gypsy tenements in the Albaicìn, Granada
As voices from a smithy lament the fate of those destined to be anvils rather than hammers, their mood is reflected by Salud's grandmother, but when Salud is in despair because she believes her lover Paco is not coming, her grandmother tries to cheer her, pointing out that although Paco is rich and high-born, he has eyes for none but Salud. Salud explains that even when Paco is late, she nearly dies of grief. She is so distraught that she begs her grandmother to see if he is coming, reflecting that death is better than a life of poverty, sorrow or being alone.
Paco arrives, swearing that he is not late and that he will always love Salud and never leave her, but in the background of their ecstatic reunion, Uncle Salvador confirms to the grandmother the rumor that Paco is about to be married to a girl of his own class. The grandmother restrains him from his plan to kill Paco, as there is trouble enough already.
Scene 1: A narrow street in Granada
The wedding of Paco and Carmela is being celebrated with song and dancing in the house where she lives with her brother Manuela. Salud watches through the window, grieving to see Paco with another woman, restraining herself with difficulty from calling out to him. She believes that death would be preferable to her suffering, but resolves to confront Paco. She is joined by her grandmother and Uncle Salvador, who curse Paco and all his family, but try in vain to stop her from going into the house.
Scene 2: The courtyard in Carmela's and Manuel's house
As the festivities continue, Paco worries about the way he has abandoned Salud. When Salud comes in with Uncle Salvador, the guests are struck by their strange appearance, but Uncle Salvador defiantly says that they can dance and sing. Salud, however, says she has not come to sing, but to see Paco and demand that he kill her. He tries to pretend that he does not know her and insists she be thrown out, but she continues to accuse him of deceiving her and then falls dead at his feet.