Fritz, a composer, and Grete Graumann, the daughter of a poor retired officer, are in love. Fritz wants to marry Grete, but he tells her that before that happens, he has to write a great piece of music and discover the mysterious distant sound ("der ferne Klang") which he hears within him. Grete tries in vain to convince him to stay with her. Fritz leaves his childhood sweetheart and goes in search of the distant sound.
As Grete is returning to her house, she meets a strange old woman, who asks the surprised girl about Fritz and promises to help Grete if she needs it. Grete continues on her way home.
Back at home, Grete's mother, Frau Graumann, speaks to Grete about the debts the family has accrued. Frau Graumann has decided that instead of borrowing money, Grete should get a job to help improve the money situation. Grete complains that her father drinks too much.
Just as she is saying this, Grete's father, Graumann, arrives with his drinking companions, an actor and Dr. Vigelius. Graumann has just gambled his daughter away to his landlord in a dice game and they have come to collect the debt. When Grete refuses, her father becomes furious. Before he can do violence to his daughter, his comrades drag Graumann back to the pub.
To calm her mother down, Grete pretends to be happy to marry the landlord. But when her mother leaves her alone in the room, she jumps out of the window and hurries away to find Fritz.
Grete cannot catch up with Fritz, and falls exhausted on the bank of a lake. She thinks of drowning herself, but then becomes conscious of the beauty of nature at night. She falls asleep, dreaming of their loving. The old woman, in reality a prostitute, appears again and promises to bring Grete a shining future if she will only follow her.
Ten years later, Grete is the celebrated queen of the demimonde on an island in the gulf of Venice, where we find her in the famous dance salon "La Casa di Maschere." But even with her fame and success, she still thinks of Fritz.
This particular day, she promises that she will end the suffering of her suitors and decide on her next lover, announcing that whoever can touch her heart the most deeply with a song will win her. The Count sings "In einem Lande ein bleicher König," a sad but beautiful song, which the crowd applauds. The Chevalier counters with "Das Blumenmädchen von Sorrent," a bawdy song that the crowd enjoys as they noisily join in the singing.
As Grete is making up her mind, a stranger appears in the midst. It is Fritz, who recognizes Grete immediately and goes straight to her. He tells her that he has not found the distant sound that has been eluding him these past ten years, so he has gone in search of her instead and now wants to make her his wife.
While Grete is still in love with Fritz and would like to be with him, she decides she must reveal to him that she is a courtesan, and then asks if he still wants to marry her. At first he does not believe it, but when the Count challenges him to a duel, Fritz, shaken and disappointed, refuses to duel and departs. Grete, in her despair, falls into the arms of the Count.
Five more years have passed, and Fritz has completed his opera, Die Harfe. During the premiere, the first act goes well, but the second act ends with an audience riot because nobody likes the music.
Grete, meanwhile, has lost the protection of the Count and is now a common streetwalker. She hears of the riot and is concerned for Fritz. On the way home, she is accosted by someone on the street, and Dr. Vigelius and the actors, who are staying in a hotel close by, appear and save her from being molested. Dr. Vigelius escorts Grete to his house, telling her that he very much regrets allowing Graumann to gamble away his daughter.
Fritz sits at home, old and depressed. He recognizes too late that he has destroyed not only his life, but also his love. In vain, his friend Rudolf tries to cheer him up and reminds him that there is still time to rewrite the opera. Fritz tells him that he is near the end of his life and only wants to see Grete, whom he foolishly pushed away twice. Rudolf goes to look for her, but Dr. Vigelius arrives instead, bringing Grete.
Grete and Fritz gratefully sink into each other's arms. Finally the composer hears the distant sound, which, it seems, was always within reach. He joyfully begins to write a new ending to his opera, but before he can finish, he dies in the arms of his beloved.