Baron Zeta, the Pontevedrian ambassador in Paris, gives a party. Camille declares his passion for Valencienne, but she reminds him she is Zeta’s devoted wife. Everyone awaits the rich widow, Hanna Glawari. Since her money represents the entire capital of the National Bank of Potevedro, there is concern that her marrying a foreigner would bankrupt the country. Hanna is unimpressed by the men’s compliments, suspecting that everyone is after her money. Hanna invites everyone to a party. Valencienne wants Hanna to marry Camille. Prince Danilo arrives. Hanna rebukes him for deserting her when she was poor. Danilo says he had no choice - and points out that she quickly married a rich banker. Valencienne sends Camille in search of her fan - on which he had written “I love you.” Kromow finds the fan and thinks his wife Olga is having an affair. To pacify Kromow, Zeta claims the fan belongs to his wife. Zeta tells Danilo he must marry Hanna to keep her money in Pontevedro. Danilo refuses, but agrees to keep all eligible foreigners away from Hanna. All the men beg for a dance with the widow. Hanna chooses Danilo, who scares the other men off by offering to sell the dance for ten thousand francs.
Hanna entertains her guests. Dinner is served. Zeta is furious to hear that Danilo does not plan to attend. However, Danilo does come. They worry that Camille is after Hanna and determine to learn the identity of Camille’s mistress. Danilo flirts with Hanna. He inadvertently gets Olga to confess to an affair with St. Brioche, and Sylviane confesses to a fling with Cascada. Prascowia thinks Danilo is in love with her. Danilo blackmails g and St. Brioche into leaving. Hanna asks Danilo whom she should marry, but he pretends not to care. When Danilo drops the fan, Hanna picks it up and thinks the words of love are meant for her. The two dance the Kolo and reminisce. The Pontevedrian government presses Zeta to end the crisis. Valencienne recovers her fan. When she bids Camille farewell, Zeta sees Camille in the pavilion with his wife. Hanna takes Valencienne’s place and convinces Zeta he was mistaken. Hanna announces her engagement to Camille. Danilo storms off to Maxim’s.
Valencienne, Sylviane and Olga go to Maxim’s to persuade Danilo to marry Hanna. The grisettes dance and sing. Cascada and St. Brioche fight over a grisette. Zeta tells Danilo that Hanna loves him. Danilo and Hanna bribe the maitre d'hôtel to clear out the restaurant. Hanna admits she has no intention of marrying Camille. She says that by her husband’s will she would lose her money if she married again. Danilo is overjoyed and confesses he loves her. She explains that she would lose her money because it would go to her new husband. All drink a toast to love.