In despair because he feels he knows nothing after a lifetime of study, Faust is preparing to take poison, but the sound of voices outside praising God causes him to hold his hand. He is visited by two of his students, Wagner and Siebel, who have been drinking all night. When he reproaches them for wasting the money their parents have spent sending them to study with him, Wagner announces that he is joining the army and explains that Siebel is falling behind in his studies because he is in love. Struck by Siebel's declaration that there must be more to life than books, Faust realises that he has wasted his life in useless study. In despair he invokes the devil and Mephistopheles appears, offering him wealth, glory and power, all of which Faust rejects, explaining that the gift which includes all these, as well as the opportunity for the pleasures of love, is what he desires - the restoration of his youth.
Mephistopheles offers a pact in which he will serve Faust on earth, on condition that Faust then serves him after death. When Faust hesitates, he shows him a vision of a young girl, Marguerite, and Faust is won. He drains the rejected beaker, which now brings life, not death, and sets off with Mephistopheles.
The townspeople are enjoying themselves. Valentine, about to go to war, is worried about his sister Marguerite. He gratefully accepts Siebel's assurance that he will look after her, commends her to the protection of heaven, then joins the carousing students. Mephistopheles appears among them and leads them in a celebration of the golden calf. He tells Siebel that his fate is that any flower he touches will wither and warns Valentine of his death, provoking him further by proposing a toast to Marguerite. Valentine's attempt to silence him is met by magic and his sword breaks off - but he and the others turn the tables by holding out the crosses formed by the hilts of their swords, whereupon Mephistopheles cowers back.
Faust demands the girl in the vision, ignoring Mephistopheles' objection that she is virtuous and thus protected by heaven, and his offer of any other girl. He will have these as well, he says, but the pretty girl first. Marguerite appears, Mephistopheles distracts Siebel, who tries to speak to her, and Faust accosts her in courtly terms, offering his arm. Marguerite answers that she is not a lady and has no need of his escort. He is touched by the modesty of her reply.
Siebel tries to pick a bouquet of flowers for Marguerite, but they wither until he breaks the spell by dipping his hand in holy water. He leaves the bouquet as Mephistopheles brings Faust to the house. Faust is so moved by Marguerite's chaste dwelling that he wants to leave, but Mephistopheles sweeps his scruples aside and leaves a casket of jewels on the step for Marguerite.
She thinks about the young man who had accosted her as she sings the ballad of the King of Thule, who treasured a golden cup in memory of his dead love. Finding the casket, she tries on the jewels and is captivated by her appearance in the mirror included in the casket. Her neighbor Martha derides her suggestion that they must have been left by mistake and encourages her to keep them. Marguerite admits that possibly the young man who accosted her might have left them. Mephistopheles tells Martha that her husband has deserted her, and pays court to her to distract her attention while Faust woos Marguerite. She confesses that she loves him, but begs him to leave, promising to meet him tomorrow, and runs inside.
Searching for Mephistopheles, who has eluded her, Martha runs into Siebel, who is concerned when he learns about the presence of the strangers, but she convinces him that by now Marguerite will be safe in bed. Mephistopheles, who has been listening to the end of the conversation between Marguerite and Faust, urges him not to hold back. Hearing Marguerite repeating her confession of love, Faust runs to embrace her while Mephistopheles laughs at the success of his scheme.
Marguerite pines for the absent Faust, comforted only by the faithful Siebel, who offers revenge, but learns that she still loves Faust. Martha tells Siebel that Valentine is back and begs him not to implicate her in the disaster.
Returning with the army, Valentine learns from Siebel that Marguerite is in trouble. Ignoring Siebel's entreaties that he be merciful, Valentine runs into the house while Mephistopheles and Faust appear in the street. Faust is remorseful, but Mephistopheles is unsympathetic. He sings a derisive serenade alluding to Marguerite's dishonor and Valentine bursts angrily out of the house. Faust, with guilt and reluctance, accepts his challenge and, assisted by Mephistopheles, mortally wounds Valentine. Marguerite runs to him, but he dies cursing her.
Marguerite, dishonored and pregnant, attempts to pray, but Mephistopheles appears in the church to taunt her with her sin and threats of damnation.
Mephistopheles brings Faust to the prison where Marguerite is awaiting execution for having murdered her child. He finds her deranged, reliving the happy moments of their love and deaf to his entreaties to flee. When Mephistopheles enters to urge haste, she is repelled by him and prays for deliverance, continuing to disregard Faust's appeals and finally recoiling from him as well.
As she dies, Mephistopheles pronounces her damned, only to be refuted by an angelic choir proclaiming her salvation.