In front of Councillor von Stahlbaum’s house.
It is Christmas Eve and Councillor von Stahlbaum is hosting a party for his children, Clara and Fritz, and their friends. Among the guests is Clara’s godfather, Doctor Drosselmeyer, who is said to have magical powers. He gives Clara a nutcracker as a present. Clara also receives a pair of magical shoes from her grandparents. Jealous, Fritz breaks his sister’s nutcracker, which is hastily repaired by Doctor Drosselmeyer. Everybody dances around the Christmas tree and the nutcracker, and the evening ends on a happy note. When the party is over and everyone has gone to sleep, Clara goes downstairs to the living room and falls asleep with the nutcracker. Mice and rats invade the room and engage in a battle against tin soldiers. Suddenly, Clara is overpowered by the rodents, and the Nutcracker, brought to life by Doctor Drosselmeyer, comes to her rescue. The Nutcracker is almost killed by the King of the Rats in the ensuing duel, but Clara ends the battle when she throws her magic shoe at the King of the Rats and hits him on the head. As a reward for Clara’s courage, Doctor Drosselmeyer transforms the Nutcracker into a handsome Prince, who takes Clara to the Land of Snow. There, she dances with the Snowflakes, and the Prince then takes her to visit the Kingdom of Sweets.
Clara and her Prince are greeted by the Sugar Plum Fairy and her Knight. The Prince tells everyone how Clara saved his life. A big party is held in her honour during which she is presented with the most wonderful sweets and is entertained by delightful characters, ending with a beautiful pas de deux. After dancing for her, the Sugar Plum Fairy reminds Clara that she must return. A golden-winged swan appears and takes Clara home.