The three Norns, daughters of Erda, gather beside Brünnhilde's rock, weaving the rope of Destiny. They sing of the past and the present, and of the future when Wotan will set fire to Valhalla to signal the end of the gods. Without warning, their rope breaks. Lamenting the loss of their wisdom, the Norns disappear.
As day breaks, Siegfried and Brünnhilde emerge from their cave. Brünnhilde sends Siegfried off to new adventures, urging him to keep their love in mind. As a pledge of fidelity, Siegfried gives her the ring which he took from Fafner's hoard. Bearing Brünnhilde's shield and mounting her horse Grane, Siegfried rides away.
The act begins in the Hall of the Gibichungs, a people dwelling by the Rhine. Gunther, lord of the Gibichungs, sits enthroned. His half-brother Hagen advises him to find a wife for himself and a husband for their sister Gutrune. He suggests Brünnhilde for Gunther's wife, and Siegfried for Gutrune's husband. He has given Gutrune a potion to make Siegfried forget Brünnhilde and fall in love with Gutrune; under its influence, Siegfried will win Brünnhilde for Gunther.
Siegfried appears at Gibichung Hall, seeking to meet Gunther. Gunther extends his hospitality to the hero, and Gutrune offers him the drugged drink. Unaware of the deception, Siegfried toasts Brünnhilde and their love. Drinking the potion, he loses his memory of Brünnhilde and falls in love with Gutrune instead. In his drugged state, Siegfried offers to win a wife for Gunther, who tells him about Brünnhilde and the magic fire. They swear blood-brotherhood, and leave for Brünnhilde's rock.
Meanwhile, Brünnhilde is visited by her Valkyrie sister Waltraute, who relates how Wotan returned from his wanderings one day with his spear shattered. (Wotan is dismayed at losing his spear, as it has all the treaties and bargains he has made—everything that gives him power—carved into its shaft.) Wotan ordered branches of Yggdrasil, the World tree, be piled around Valhalla; sent his ravens to spy on the world and bring him news; and currently awaits in Valhalla for the end. Waltraute begs Brünnhilde to return the ring to the Rhinemaidens, since the ring's curse is now affecting their father, Wotan. However, Brünnhilde refuses to relinquish Siegfried's token of love, and Waltraute rides away in despair.
Siegfried arrives, disguised as Gunther using the Tarnhelm, and claims Brünnhilde as wife. Though Brünnhilde violently resists, Siegfried overpowers her, snatching the Ring from her hand and placing it on his own.
Hagen, waiting by the bank of the Rhine, is visited in his sleep by his father, Alberich. On Alberich's urging, he swears to acquire the Ring. Siegfried arrives as dawn breaks, having secretly resumed his natural form and traded places with Gunther. Hagen summons the Gibichung to welcome Gunther and his bride.
Gunther leads in a downcast Brünnhilde, who is astonished to see Siegfried. Noticing the Ring on Siegfried's hand, she realizes she has been betrayed. She denounces Siegfried in front of Gunther's vassals. Siegfried swears on Hagen's spear that her accusations are false. He then leads Gutrune and the bystanders off to the wedding feast, leaving Brünnhilde, Hagen, and Gunther alone by the shore. Deeply shamed by Brünnhilde's outburst, Gunther agrees to Hagen's suggestion that Siegfried must be slain for his honour to be regained. Brünnhilde, seeking revenge for Siegfried's treachery, joins the plot and tells Hagen about the hero's sole weakness: though she had used her magic to ward him from harm, she had left his back unguarded, knowing that he would never flee from a foe. Hagen and Gunther decide to lure Siegfried on a hunting-trip and murder him.
In the woods by the bank of the Rhine, the Rhinemaidens mourn the lost Rheingold. Siegfried happens by, separated from the hunting party. They urge him to return the Ring and avoid its curse, but he ignores their tidings of doom. They swim away, predicting that Siegfried will die and that his heir, a lady, will treat them more fairly.
Siegfried rejoins the hunters, who include Gunther and Hagen. While resting, he tells them about the adventures of his youth. Hagen gives him a drink that restores his memory, and he tells of discovering the sleeping Brünnhilde and awakening her with a kiss. Suddenly, two ravens fly out of a bush, and as Siegfried watches them, Hagen stabs him in the back with his spear. The others look on in horror, and Hagen calmly walks away into the wood. Siegfried dies, lingering on his memories of Brünnhilde. His body is carried away in a solemn funeral procession.
Back in Gibichung Hall, Gutrune awaits Siegfried's return. Hagen arrives, ahead of the funeral party. Gutrune is devastated when Siegfried's corpse is brought in. Gunther blames Siegfried's death on Hagen, who defiantly admits to the murder and claims the Ring on Siegfried's finger by right of conquest. When Gunther objects, Hagen attacks and kills him. However, as Hagen moves to take the Ring, the dead hero's hand raises threateningly, and he recoils.
Brünnhilde makes her entrance and takes charge of the scene. She issues orders for a huge funeral pyre to be assembled by the river, and sends Wotan's lurking ravens home with "anxiously longed-for tidings." She takes the Ring and tells the Rhinemaidens to claim it from her ashes, once fire has cleansed it of its curse. The pyre lit, Brünnhilde mounts her horse Grane and rides into the flames. What follows is perhaps the most difficult to realise stage directions in the history of opera.
The fire flares up as the Rhine overflows its banks, bearing the Rhinemaidens on its waves. Hagen leaps after the Ring and drowns. The Rhinemaidens swim away, bearing the Ring in triumph. As the flames increase in intensity, Valhalla comes into view in the sky. Bright flames seem to flare up in the hall of the Gods, in which the Gods can be seen, finally hiding them from sight completely. The curtain falls.