Scene 1 - The rich mansion of a guild in Novgorod
The wealthy Novgorod merchants congratulate themselves on their prosperity. Nezhata, a gusli player from Kiev, sings an heroic song. In reply, Sadko also sings, but the merchants laugh at him when he suggests that Novgorod would be more prosperous if a river joined Lake Ilmen to the ocean.
Scene 2 - The shores of Lake Ilmen
Sadko wanders unhappily by the lakeside. His singing attracts some swans, one of which changes into Volkhova, the Sea Princess, who wishes to marry a mortal. She explains to Sadko how to catch three golden fish which will lead to his fortune after a long voyage. Princess promises to him to wait patiently for his return. At dawn from the lake the voice of the Sea-King is heard. He calls his daughters home into the depths. Girls once again turn into white swans and swim away into the distance.
Scene 3 - An attic in Sadko's home (in Novgorod)
Sadko's wife, Lubava, is missing her husband. She is happy when he comes home at last, but distressed when he announces his intention to leave immediately in order to seek his fortune.
Scene 4 - A pier in Novgorod (on the banks of Lake Ilmen)
Merchants assemble at the quayside and Nezhata sings another gusli song. The merchants deride Sadko when he explains how he will win his fortune by catching three golden fish. Sadko bets them that he can do this, and, after he is successful in catching the fish, he wins their ships to take on his voyage. He sets about gathering a crew for his voyage. Three visiting merchants, a Viking, an Indian and a Venetian, sing in turn of their homelands. Sadko decides to set sail for Venice.
Scene 5 - A peaceful expanse of the ocean
Sadko's fleet of ships is returning home, laden with treasure, but becomes becalmed. Sadko's crew throw treasure over the side to propitiate the Sea-King, but no wind appears. Sadko is left behind, clinging to a log, when the wind suddenly picks up while he is overboard.
Scene 6 - In the depths of the sea
The scene shifts to the realm of the sea-king, where Sadko sings to the king and queen, winning the hand of their daughter, Volkhova. The wedding celebrations become so boisterous that a storm springs up, sinking ships on the surface of the sea, and the realm of the Sea-King is destroyed. The end of the reign of the pagan king is heralded by an apparition of a Christian pilgrim (actually St Nicholas of Mozhaysk) Sadko and Volkhova escape the destruction on a sea-shell.
Scene 7 - Novogrod, a green meadow on the shores of Lake Ilmen
Sadko is asleep by the lakeside. Volkhova watches over him and sings a lullaby. Before he wakes, she bids him farewell and then disappears, becoming changed into the River Volkhova that now links Lake Ilmen with the sea. Lubava finds her husband asleep and wakes him: he believes that his voyage was nothing but a dream, but the sight of the new river and his fleet of ships convinces him that he really is now a very wealthy man.