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If he could do so, with Siegfried's help, he would fulfill his dream of obtaining Fafner's Ring and becoming ruler of the world. A hunting horn announces the approach of Siegfried, who bounds in with a bear he has captured, playfully scaring Mime before releasing the animal to the forest.

They do not resemble each other, he says, and grabbing Mime by the throat, he demands to know who his real parents were. The Nibelung confesses that years ago he found a woman in distress in the woods and nursed her as she died giving birth. Her name was Sieglinde, and the baby's father had fallen in combat; Siegfried's name is a legacy from his mother. Moved by the story, Siegfried asks for proof of what he has been told, at which Mime takes forth the splintered remnants of the sword Nothung. At once the youth insists the weapon be welded whole, so he can go forth into the world to seek adventure. Siegfried runs back into the forest.

The Wanderer answers correctly, then declares that Mime too must answer three questions, to save his own head: what is the race Wotan mistreats but loves most (the Wälsungs), what is the sword Siegfried must use if he is to kill the dragon Fafner (Nothung), and who will repair the weapon? When Mime cannot answer the last question, the Wanderer tells him the sword can be forged only by one who has never known fear - and he leaves the gnome's head as bounty to that person.

Hearing distant growls, Mime panics, thinking Fafner is coming, but it is only Siegfried, eager to wield his father's sword. Mime tries to find out whether the youth comprehends the meaning of fear. Since he does not, Mime decides to take him to Fafner's lair, where surely he will learn. When Siegfried once more orders Mime to finish Nothung, the Nibelung sobs that he lacks the craft, at which Siegfried repairs the sword himself, launching into a spirited forging song as he works. While the youth toils, Mime plots to get rid of him once the dragon has been killed and the treasure recovered. Siegfried brandishes the finished sword, splits the anvil with it and rushes into the forest.

The Nibelung is perplexed that his enemy seems to be helping him. Wotan and Alberich rouse the sleeping Fafner to warn him of approaching danger, urging him to surrender the Ring, but Fafner only mumbles he will devour any attacker. God and Nibelung disappear in the shadows.

High in the branches over his head, a Forest Bird warbles a song he wishes he could understand.

When Siegfried draws Nothung from the beast, his fingers are burned by blood, so he touches them to his lips. The taste of the dragon's blood enables him to understand the language of the Forest Bird, who tells him of the Nibelung hoard, the Tarnhelm and all-powerful Ring.

Now the Forest Bird warns Siegfried about Mime, who soon creeps forward, bearing a poisoned drink. Reading the dwarf's true thoughts, the youth loses patience with the Nibelung and kills him, as Alberich's laughter echoes in the distance. While Siegfried rests, lamenting his solitude, the bird tells of a maiden who sleeps on a fire-encircled rock - Brünnhilde, a bride who can be won only by a hero who knows no fear.

Siegfried responds arrogantly, angering the god, who tries to block his path. Drawing Nothung, the youth splinters the Wanderer's spear with a single stroke. Realizing his power has ended, the deity retrieves the broken pieces, then vanishes as Siegfried scales the mountain.

Throwing herself into Siegfried's arms, she bids farewell to memories of Valhalla, abandoning herself to human love, exulting even in thoughts of death.

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