The children rush into the garden, leaving Rácz despondent, until his daughter Sári appears. Rácz asks for his niece Juliska, whom he is hoping to make his fourth wife, but Sári refers him to his doctor's orders that he should not get excited. His daughter points out that he has already been married three times which, in her opinion, is quite enough and Rácz is left to think back over the days when he was the world's leading virtuoso gypsy violinist and the object of all the young ladies' adulation.

Rácz is pleased when Juliska at last arrives, bringing him a bundle of letters that demonstrates the extent of his international fame — letters from as far afield as London, Paris, Manchester, Florence and Odessa. Rácz sees it as natural enough. Heidsieck exports champagne, Krupp cannons, and Rácz gypsy musicians. Even now Stockholm is ordering a double-bass player and the Trocadero in Paris a clarinettist. Among the letters is one marked 'Private', which turns out to be from his friend Count Irini, announcing that he intends to pay a visit. Rácz is delighted, though he takes care to warn Juliska not to flirt with the young Count.

Rácz's eldest son and musical heir, Laczi, enters just in time to interrupt his father and Juliska in a farewell embrace, and Rácz scolds Laczi for failing to knock. A more constant source of discord between Rácz and his son is the younger man's discovery of the music of Wagner, Bach and Händel, which he finds more stimulating than the old gypsy songs and, when Sári returns, she senses a distinct atmosphere between the two. She suggests they behave more sensibly and turns to attending to the children who are asking for food, though not before they have got her to sing a fairy-tale song with them.

Gaston, Count Irini, arrives with Cadeau, the representative of the Count's guardians and, seeing Sári bending over Klari, Rácz's youngest child, he cannot resist giving her a kiss. The visitors are greeted by Rácz with a bottle of Tokay wine, and Gaston chides Rácz for never having let on that he has such an attractive daughter.

Gaston reveals that he has come to ask Rácz to play at a concert he is giving in Paris for the King of Massilia. Rácz is attracted by the idea, as he once received a decoration from the King, but he is inhibited by an even older memory. Once, when he was eighteen and playing for a ball in London, he met a young French lady who invited him to her home in Paris. Alas, her father forbade it, and he has avoided Paris ever since. In that French lady and in Paris, he feels, resides his youth. Gaston pleads with him to change his mind, but Rácz is adamant in his refusal.

When Juliska comes to set the table, Gaston is astonished to discover that Rácz is hoping to marry her but, as Rácz comments, marrying is like smoking—it's difficult to give it up. While Rácz takes his guests to show them around his property, Laczi joins Juliska in the room, but she pretends not to notice him. Laczi responds to this snub by sitting himself at the piano and playing increasingly ambitious modern tunes. Juliska mockingly dances and trills, ever more piqued at being ignored by Laczi.

Gaston comes in looking for some ink so that Rácz can sign the contract to play in Paris and finds Sári. She suggests that Gaston leave her father in peace, but the Count is determined not only to take her father back with him but to win another kiss from Sári. She is not unimpressed when he reels off his pedigree, particularly when he mentions that his years as a ward are over and he is looking for a bride. She playfully suggests that she has a bride for him. Gaston plays along, convinced that she is referring to herself.

In spite of Gaston's forceful pleading, Rácz remains adamant that he will not go to Paris, and Gaston tries to enlist Juliska to help change his mind. Laczi suggests that he should go instead, but old Rácz, who has little opinion of his son's talents, is scathing. He points out all the assets that a genuine gypsy violinist must have — the fire, the ability to laugh and cry, to play and lead at the same time, to flirt with attractive women, to be in command and yet a heart-breaker. Laczi rejects the criticism but Rácz persists. Laczi is determined to go and to prove himself, though Juliska pleads with him to stay. As a last resort, Gaston brings some members of Rácz's orchestra who beg him to agree to go to Paris. Finally, in spite of Sári's pleas with him to stay home, he leaps up and, to the delight of Gaston and the gypsies, tells them he is prepared to go.

Then, to Gaston's astonishment, Cadeau enters, followed by Juliska and Sári. He is delighted to see them — for his own sake for Sári, and for Rácz's sake for Juliska — but the attention that Gaston pays to Juliska disappoints Sári and, though she soon becomes the centre of attention for the Parisian young ladies, she feels uncomfortable in her Hungarian costume amid the fashions of France.

When Rácz puts in an appearance, he has undergone a complete transformation. He no longer looks an old gypsy, but a elegant man of the world. His hair has been dyed black, his beard has gone in favour of a neat moustache, he is wearing evening dress, and carrying a top hat in one hand and his violin in the other. The King is introduced to him as Count Estragon but, keen to get in a mention of his decoration from the King, he is reluctant to observe the monarch's incognito, and Gaston finally has to step in to save the King from embarrassment.

At the sound of dance music, Rácz begins to make some comparisons between modern music and gypsy violin playing.

Sári and Juliska greet the old man warmly. They are surprised to see him looking so young, but he gives the credit to three weeks treatment at the spa of Pistyán. He introduces his daughter and niece to the disguised King, who takes something of a fancy to Sári and, when Juliska laughs at the idea of Sári marrying a King, Sári retorts that it is no funnier than the idea of the young Juliska marrying old Rácz. Juliska answers that she has agreed to do so purely out of gratitude and, when Sári suggests that she would be better off with Laczi, Juliska tells her that the problem is to get her cousin to speak to her of love.

Who should then turn up, but Laczi himself? It seems that it is he who has been engaged as director of the music during dinner. Away from home, he seems to have much more to say to Juliska, and the two are soon making up for lost time until she feels obliged to tell him that she is already engaged to someone else. It is all his fault for being so backward in showing interest in her. Laczi leaves, and Juliska is joined by the King, arm in arm with Sári, and finally by old Rácz, and the four make merry as Rácz enjoys his familiarity with the King.

Laczi is now determined to find out whether Juliska is engaged to his father or, perhaps, to the Count. He asks the servant, Pierre, to tell his father that a man from Lörinczfalva wishes to speak to him, and Rácz, surprised to see Laczi in Paris and here at the ball, greets his son warmly. But what is he doing here? Whatever it is, he can't be doing too badly to be mixing in this company. Didn't he always say the boy should give up music? When he discovers that Laczi is there in charge of the music, he is horrified and begs him to give it all up and return home.

Now Gaston is showing more interest in Sári and goes as far as to suggest that he should go with her to Hungary and become a shepherd on the puszta. They indulge in a prolonged kiss and Sári's heart beats faster as at last he speaks to her of love. Juliska and Laczi oversee Sári and Gaston embrace and decide to take a leaf out of their book but their enjoyment is interrupted when the news comes that old Rácz has gone missing just as it is time for him to play.

Gaston begs Laczi to step into the breach and fill his father's place and, borrowing a violin from one of his musicians, the young man takes the stand and begins to play. Rácz, returning, stands and listens motionless, watching, as Laczi's performance is greeted with a storm of applause and the King steps forward to shake the young man warmly by the hand. Rácz cannot believe that such music should attract such acclaim, but paternal pride is stronger than personal pride, and he hurries forward to embrace his son. When Rácz is asked to play in his turn, the result is anti-climax. The King thinks little of his outdated gypsy music and everyone goes off to dance, leaving Rácz alone, realising that it is the end for him. The world has moved on and he has been left behind.

Rácz has desperately been giving concerts to ever dwindling audiences and now, knowing that his playing days are over, he is ready to accept Gaston's offer to buy his Stradivarius violin. The old man is presented to the Countess Irini, and is most taken by her faded but still evident beauty, and he tells her that he will return to Lörinczfalva the following morning to marry Juliska. The Countess declares that it has been her life's mission to mend broken hearts, and she recalls the day, thirty-eight years before, when she flirted with a young gypsy violinist at a ball in London.

A servant shows in Laczi, who is overjoyed to see Juliska. The Countess instructs them to kiss each other, and they dutifully but happily embrace.

Rácz, left alone with only his Stradivarius for comfort, is interrupted by Cadeau, who has now made up his mind to marry Juliska. Then Gaston presents his grandmother with his intended bride — Sári and Rácz is sagely reflecting that love and energy belong to the young, when Cadeau reappears, having now decided to marry Sári!

To Laczi he hands his Stradivarius, to Gaston the scarf-pin he received from the King of England, to Sári the ring he was given by the Tsar of Russia, and to Juliska the ring he received from the Queen of Spain.

Pali Rácz (1830-86) and his son Laczi were real-life gypsy musicians of international repute. The above synopsis includes the third act in its final, revised version, and has been condensed from the synopsis in "Book of the Musical Theatre" by Kurt Ganzl