Act I
Magda entertains several friends in her elegant Paris house. When the poet Prunier mentions that romantic love is the latest fashion, Magda's maid Lisette scoffs at the idea. Romantic love, however, is the subject of Prunier's newest, nearly complete lyric. He sits down at the piano to try out the first verse, in which his heroine, Doretta, turns down a king's fortune to await the love of her life. Magda then offers her own ending, in which Doretta awakens to love with a young student. She closes with the thought that love is more important than wealth.

Magda reflects upon her own life before she met Rambaldo, who pays for her comfortable existence. In particular, she remembers an evening at Bullier's cafe where she spent a few romantic hours drinking and dancing with a young man she never saw again. Prunier entertains the ladies by pretending to read Magda's palm; he predicts that she will soon migrate, like a swallow, beyond the sea to a land of dreams.

Ruggero, the son of an old friend of Rambaldo, arrives with a letter of introduction. It is his first day in Paris, and the other guests suggest the nightspot Bullier's for his entertainment. The guests all take their leave, and Lisette prepares for her night off.

Lisette, in fancy clothes "borrowed" from Magda's wardrobe, steals away with her secret lover, Prunier. Soon afterward, Magda, remembering that long-ago night at Bullier's, goes out too, now dressed as in the simple clothes of a grisette.

Act II
Later that evening, Ruggero enjoys the bustling crowd at Bullier's. Magda enters and is soon surrounded by admiring young men. She allows them to think that she is there to meet Ruggero, and sits down at his table. Not recognizing Magda, Ruggero asks her to dance. She tells him her name is Paulette. Prunier and Lisette come in, arguing about the poet's attempts to sophisticate her. Magda quickly signals to Prunier not to reveal who she really is. The four drink a toast to life and love. Their bliss comes to an abrupt end when Rambaldo enters. He asks Magda to come home with him, but she refuses; she has found love with Ruggero.

Act III
Magda is now living with Ruggero (who still knows nothing of her past) in a villa on the Cote d'Azur. He tells her that he has written home to ask his family's permission to marry her. Prunier and Lisette come in, arguing about his disastrous attempt to foster her career as a singer. Prunier tells Magda about the debacle and Magda agrees to take the humiliated girl back into service. When Magda is alone, Rambaldo arrives. He tells Magda that he is prepared to wait for her to return to him in Paris. He also gives her a well-filled purse, for he knows that she and Ruggero are in debt. Ruggero rushes back with an anonymous letter that reveals Magda as Rambaldo's mistress. Magda tries in vain to explain that she has tried, through her love for him, to put an end to her former way of life, but Ruggero denounces Magda and runs out. Nothing is left for Magda. After having known real love, she cannot live without it.