Arsena (daughter of a miserly old farmer Zsupán) is digging for treasure which he fondly believes to be buried somewhere around. This is his daily routine, and the more he looks without success, the worse his temper becomes. Czipra looks out of her window and makes fun of his efforts. She has been watching him for weeks and has a low opinion of his wasting time on this activity while the other Gypsies are out doing an "honest" day's work. She tells him that if he continues with this fruitless quest, he will end up penniless and never marry, as he hopes, Arsena. Sándor Barinkay, son of the late owner of the castle, arrives accompanied by Conte Carnero, Commissioner for Oaths, who is here to sort things out for him. The Commissioner suggests they get on with the job and call on Czipra as a witness. They send for Zsupán. In the meantime he tells Barinkay of the beautiful Arsena. To pass time Czipra tells their fortunes and reveals to Sándor Barinkay that there is happiness and fortune in store for him. He will marry a faithful wife who will, in a dream, discover where the treasure is hidden. Carnero is also told that he will recover a treasure that he has lost, which leaves him slightly puzzled as he cannot remember having had one. Zsupán arrives and tells everyone that he is a highly successful pig-breeder adding that he lives for sausages and wine and has little time for art. He agrees to witness Barinkay's claims but warns him that he can be a contentious neighbour. Barinkay suggests that he might marry Zsupán's daughter and Arsena is sent for. But it is Mirabella, the governess, who first appears. It seems that she is Carnero's long-lost wife, so part of Czipra's prediction is immediately realised. Carnero shows little sign of delight and a rather joyless reunion takes place. Mirabella says that she had believed her husband to have been killed at the Battle of Belgrade. Arsena arrives, heavily veiled, but though the chorus hail the bride-elect she is not so co-operative. She is in love with Ottokár. Barinkay makes a formal proposal but Arsena tells him that she is descended from the aristocracy and can only marry someone of noble birth. Zsupán and the others tell Barinkay that he must do something about this. He is left brooding but hears