The play begins with a short rhymed Prologue, which explains that the author aims to show that "Love is not a blessing, but a curse!" But the actor who speaks these lines disagrees with the author, and ends by asking the audience, "had the world ne'er known/Such Love as you, and I, and he, must mean — /Pray where would you, or I, or he, have been?"

The scene is "Fairy Land" — which is located, not in an Arcadian Landscape, but on the upper side of a cloud, from which the mortal world below is visible. As the play opens, two female fairies, Darine and Zayda, are discussing the nature of the "wicked world". The fairies are noble, sinless beings, but possessed of a rather prurient curiosity about the world below.

The Fairy Queen Selene enters: she explains that every fairy has an exact physical counterpart in the mortal world. Another male fairy, Lutin, returns from a journey to the earth, bringing news that the male fairies Ethais and Phyllon are to visit the Fairy King in "mid-earth" and return to Fairy Land with "some priceless privilege" for the fairies. So off Ethais and Phyllon go.

After some discussion, the remaining fairies decide to bring up to Fairyland the mortal counterparts of Ethais and Phyllon, as a "half-forgotten law" of Fairyland allows them to do. In this way they will be able to convert these mortals to the virtuous life, by the power of example. Besides, they are curious about "the gift of Love", which, Selene tells them, is the one compensation mortals have been given for all the evils they must endure on earth. Selene throws two roses down to earth, and so summons the mortal counterparts of Ethais and Phyllon to Fairy Land.

These are "barbaric knights", engaged in fighting a duel with each other at the moment they are snatched up into the clouds. After a little confusion, they resume the fight, and Sir Ethais is wounded. They call off the fight for the moment, realising that they are surrounded by beautiful women — and, indeed, women who are suddenly showing considerable admiration for them. (Selene exclaims: "what can gods be like if these are men.") Darine immediately latches on to Sir Ethais; but it soon becomes apparent that Selene, too, is attracted to him.

Lutin re-enters, and Sir Ethais mistakes him for his servant Lutin, the mortal counterpart of this fairy. Lutin, seeing that "mortal love" has struck the fairies, is disgusted, and explains that "love is but the seed;/The branching tree that springs from it is Hate!". He quickly realises that he is out of place in this situation, and goes to join the other two male fairies in mid-earth, flinging curses at the immoral mortals as he goes. Selene kneels at the feet of Sir Ethais, declaring that she loves him.

Darine and other minor fairies are hanging round the entrance to Selene's "bower", where Selene has been nursing the wounded Sir Ethais for the past six hours. The fairies pass the time by, frankly, bitching about Selene's conduct: "Surely this knight might well have learnt on earth/Such moral truths as she is teaching him."

Selene enters, and the others treat her with ironic politeness. One by one they leave her; Selene is puzzled. She has nursed Sir Ethais through the fever of his illness, and now that he is restored to his senses he has declared his love for her. He enters now, and they talk of love. She is naively romantic, he is gallant and smooth-talking. He is also, as his asides make clear, a Cad and a Bounder, a mere trifler with women's hearts. She gives him a ring as a pledge of love, and they go off into her bower.

Darine watches them leave: as we saw in Act One, she also has fallen in love with Sir Ethais, and now she is riven with an intense jealousy. She and Sir Phyllon have a scene, in which he tells her that she can win Sir Ethais's love by healing him, which can be done by securing a "panacea that will heal all wounds", which is in the possession of Ethais's servant Lutin. Darine persuades Selene to summon the mortal Lutin to Fairy Land: another rose is dropped, and the mortal Lutin appears.

If the fairy Lutin was a kind of killjoy Malvolio figure, his mortal counterpart is more like Bottom (or, perhaps more accurately, Sancho Panza). Finding himself transported to a place where he is entirely surrounded by beautiful women, he concludes: "By some mistake my soul has missed its way,/And slipped into Mahomet's Paradise!" So starved are the fairies of "mortal love" that even he earns their affection; and he does not object to their attentions.

It turns out that he is married to the mortal counterpart of Darine: so when the fairy Darine enters, he naturally assumes that by some horrible chance his wife has followed him into his Mahomet's Paradise. When Darine asks him for his universal panacea to heal Sir Ethais, adding that she loves Ethais, he is outraged. Why should he assist his wife's love affairs? He gives her a sleeping draught, telling her that it is the panacea.

Darine tells Sir Ethais that Sir Phyllon says he is exaggerating the seriousness of his wound, through cowardice. Sir Ethais, enraged, wants to resume the fight as soon as possible, but is prevented only by the wound: Darine says she has Lutin's panacea, and gives it to him in exchange for a pledge of his love for her — the ring Selene gave him.

Selene enters, and Darine berates her for introducing mortal love to Fairy Land. Selene, seeing the justice of this, resigns her place as Fairy Queen to Darine: the coronet is placed on Darine's head. Selene comforts herself with the knowledge that at least she has the love of Sir Ethais — but Darine corrects her, showing her the ring Sir Ethais has given her. Selene is shocked and disillusioned. She is transformed with a bitter fury against Sir Ethais, against Darine, against her fellow-fairies: she cries: "Are ye not content?/Behold! I am a devil, like yourselves!"

Sir Ethais, having taken the sleeping draught, cannot now be awoken. Lutin is told that Darine is not his wife, but merely her fairy counterpart; and in relief he gives her the real panacea, which she immediately gives to Sir Ethais. He revives, and immediately attacks Sir Phyllon, who he believes called him a coward. Phyllon denies it, and Darine admits that it was a lie she told to gain Ethais's love. Both men are disgusted by this.

Sir Ethais and Selene meet, and he apologises to her for the wrong he has done her in betraying her love. But he is appalled by the bitter intensity of her feelings, which is the result of a mortal passion being put into an immortal body.

But see! The three male fairies are returning, and their mortal counterparts must leave. Selene tries to hold Ethais back, because her love for him, though embittered, still burns. But he shakes her off, and, crying, "I go to that good world/Where women are not devils till they die!", leaps off the cloud and back to earth.

As the mortals disappear, the attitudes of the fairies change, and they seem to be awakening from a dream. They regain their true, virtuous selves, and are utterly ashamed of their former conduct. Darine and Selene are reconciled, and Selene says that they have no right to feel superior to mortals who fall from virtue more readily because they have been more often tempted.

The fairies Lutin, Ethais and Phyllon return, bearing great news. Their king has decided to bestow on the fairies a great gift — the gift of mortal love! Selene's final speech, rejecting this gift, prefers the fairies' life of placid tranquillity to the interesting but tempestuous life the mortals enjoy. "No, Ethais — we will not have this love!"