The story opens in the village square of Olympia. Dr. Coppelius's daughter, Coppelia, is seated on the balcony of his house, posed as if she were reading a book. Swanilda enters the square and sees Coppelia on the balcony. She is curious about this new girl, especially since all the boys seem to like her so much. Swanilda tries to get Coppelia's attention by waving and dancing and calling to her but the doll does not even look up from her book. Swanilda thinks this is very rude and is ready to storm from the square when she hears footsteps and decides to hide instead.
Franz then comes into the square and seeing Coppelia on the balcony, starts to flirt and show off for her. She doesn't respond, of course, but when he blows her a kiss, the doll seems to rise and nod to him. Franz doesn't know it but Swanilda has been watching the whole time. She goes away mad but then reappears chasing a butterfly, pretending she didn't see a thing. Franz catches the butterfly and pins it to his vest. Swanilda gets very angry and bursts into tears, telling Franz he must not love her anymore since he only seems interested in the girl on the balcony.
Their argument is interrupted when other villagers come into the square for a group dance. Franz makes matters worse by joining them and dancing with some of the other girls. While they are dancing, the Mayor of the town shows up to announce a celebration in honor of the town's new bell. He also promises a bag of gold to all couples who will marry on that day. The Mayor asks Swanilda if she and Franz will be among the lucky couples and she tells him that she doesn't think Franz loves her anymore. He suggests the old custom of shaking a stalk of wheat to hear the special sound that will tell her that Franz still loves her. Everyone gathers around, but to their surprise, Swanilda hears nothing. Franz, of course, just laughs it off.
Swanilda is angry. She throws down the stalk of wheat and runs off. She dances with her girlfriends, avoiding Franz and pretending she doesn't care. He tries to get her attention, but she acts like she doesn't need him anymore. Franz then dances with another girl to make her jealous. He likes Swanilda, but he's interested in the beautiful Coppelia, too.
As evening falls, old Dr. Coppelius leaves his house to go to the tavern. Along the way he is teased by some of the village boys, and in the confusion he drops his key. Swanilda finds the key, and she and her friends decide to explore the workshop and find the mysterious girl from the balcony. Dr. Coppelius realizes he lost the key, returns home to find his door open and rushes upstairs to see who has broken in. As the curtain falls, Franz returns and starts to climb up to the balcony to meet the beautiful Coppelia.
Swanilda and her friends tiptoe into Dr. Coppelius's workshop to find several large figures dressed in strange clothes. Swanilda looks behind a curtain and finds Coppelia sitting in a chair, still reading her book. She tries to talk to her but gets no response, even though her eyes are wide open. After tugging on her dress and shaking her and still getting no response, they realize that Coppelia is nothing more than a life-sized mechanical doll. They all find this very amusing, especially when they think of poor Franz blowing kisses to a doll. They then set all of the dolls in motion and have a great time dancing around with them.
Suddenly, Dr. Coppelius comes in to the workshop, and the girls all scatter in different directions...all except Swanilda, who hides behind the curtain with the doll. Just when things calm down, Franz enters the workshop through the window to look for his lovely Coppelia. Dr. Coppelius catches him but when Franz explains that he is in love with Coppelia, the old man realizes he can use Franz for his greatest experiment. He puts Franz into a deep sleep with drugged wine and finds a magic spell that will transfer Franz's life force into the doll.
In the meantime, the clever Swanilda has put on Coppelia's clothes and taken her place behind the curtain. Dr. Coppelius wheels her out, thinking it is his beautiful doll, and casts his magic spells. Swanilda, dressed as Coppelia, begins to move. She dances, like a robot at first, but then more and more like a real live girl. Dr. Coppelius is thrilled that his creation has come to life, and his delight increases as she dances for him, following his every direction.
Swanilda soon grows tired of the game, anxious to wake Franz and escape. She begins to tease the old man, dancing wildly around the workshop. She eventually wakes Franz and they show him the real Coppelia still sitting behind the curtain. Dr. Coppelius realizes how he has been fooled. Swanilda and Franz run laughing from the workshop, leaving the heartbroken old man alone with his lifeless doll.
The next day, during the celebration for the new bell, the couples to be married, including Franz and Swanilda, receive their bags of gold. Dr. Coppelius bursts into the square and demands to be paid for the damage done to his workshop by Swanilda and her friends. Swanilda offers him her bag of gold, but the Mayor says no and gives Dr. Coppelius another bag of gold so that everyone can be happy on this joyous occasion. The whole village then joins in the dancing to celebrate the marriage of Swanilda and Franz.