In the mountains of Poland, Rosaura and her servant, Fife, are traveling, disguised as men, when their horses run off and abandon them. They see a small tower, where they find Segismund, in chains and bemoaning his fate. As they listen to him, Clotaldo, his guard, enters with soldiers. Clotaldo begins to question the intruders, but when he sees Rosaura’s sword, he recognizes it as one he gave to a man who saved his life many years ago. He concludes that Rosaura must be the man’s son (since she is disguised as a man) and vows to obtain a pardon from the king for her trespass in the tower, and to help her in any way he can.

In the royal palace in Warsaw, King Basilio explains to his niece and nephew, Princess Estrella and Astolfo, Duke of Muscovy, why his son, Prince Segismund, is chained up in a remote tower. The king is a student of astrology and the occult, and saw signs at the prince’s birth that he would grow up to be an exceptionally savage and evil man. He therefore pretended that Segismund was dead and had him imprisoned far from the court. Now he is worried that he acted unfairly and proposes to bring the prince to court. If he proves amiable and kindly, the king will give him the crown of Poland and retire to a life of contemplation. If he is cruel and wicked, as predicted, he will be returned to his dungeon. Estrella and Afonso approve this course of action.

In the next act, Prince Segismund has been given a strong sleeping draught and brought to the palace. He is confused by his new surroundings and irritated by the obsequiousness of the courtiers. He sits on the throne, and the nobles of the court congratulate him on having taken his rightful place. Clotaldo enters and assures Segismund that the courtiers are telling the truth: he is the rightful prince of Poland. However, when Segismund asks him to explain, Clotaldo prevaricates and Segismund grows impatient, threatening the old man with his sword. Rosaura enters and remonstrates with him for attacking an old man, then immediately disappears again.

Astolfo and Estrella enter the throne room. Segismund is irritated by Astolfo but captivated by Estrella, whom he embraces warmly. Astolfo protests, and Segismund grabs him violently by the throat. Basilio enters and is concerned to see this display of violence from his son, which seems to confirm his worst fears. He warns Segismund against giving way to anger, but Segismund dismisses him contemptuously, saying that Basilio has wronged him and he will have his revenge. Soldiers come into the throne room and, at the bidding of Basilio, arrest Segismund.

Back in his dungeon, Segismund discusses what happened at court with Clotaldo. He is adamant that these events really occurred, but Clotaldo tells him he was dreaming. He also says that it would be better if this were the case, since Segismund behaved badly and presumably would not want to have acted in such a way in real life. Segismund is persuaded and decides to go back to sleep in an attempt to recapture the dream.

After Clotaldo has departed, some soldiers enter, in search of Segismund. They find him in the tower and bring him out, still sleeping. When they have woken him, their captain tells them that they and many others are loyal to his claim to the throne and intend to join battle with Basilio’s forces. Segismund, however, thinks he must be dreaming and tells the captain so. While they are arguing, they hear...