The second act shows a hut in the mountains, where Ulana is singing a lullaby to her infant, while Manru is struggling between his love and his desire to join the Gypsies. Urok enters the hut, and suddenly beautiful violin music is heard in the distance, which Manru recognizes as coming from the Gypsy fiddler, Jogu. The charm of the music proves too much for him, and he rushes from the hut and disappears in the forest. Jogu tries to persuade him to rejoin the band and be their chief, telling him that the beautiful Gypsy maiden Asa is pining with love for him. In the midst of his temptation Ulana appears and finally persuades him to return to the hut, where she gives him a drink of the magic potion. This has the effect of temporarily winning back his love.
The third act reveals a lake in the mountains, where Manru is seen wandering in the moonlight. He hears strange voices echoing through the mountains, and, becoming weary, falls asleep beneath the trees, where he is found shortly after by the band of Gypsies. The maiden Asa recognizes him immediately, and begs Oros, the Gypsy chief, to forgive him and receive him back into the tribe. Oros refuses to comply with her wishes, and finding his people ready to forgive Manru, leaves the band in anger. Manru is finally persuaded by Asa to accept the position of chief in Oros' stead. Urok suddenly appears in their midst and pleads with Manru not to desert Ulana and his child, but all in vain, as Manru finally succumbs to the alluring smiles of Asa and disappears in the mountains with the Gypsy band.
On hearing of his desertion, Ulana, maddened with grief, throws herself into the lake and is drowned. Manru and Asa, walking down the mountain path with their arms about each other, are suddenly confronted by Oros, who, grappling with Manru, hurls him into the abyss, thereby regaining his position as chief of the Gypsies.