Neidhöhle

The lair of the Giant turned Dragon Fafner, meaning Envy-Hole. It is located on the Eastern fringe of a forest. After Fafner gains the ring, tarnhelm, and treasure of the Nibelung Dwarf Alberich he hides it in a cave and becomes a Dragon. He holds the treasure for many years. Alberich watches the lair, hoping to recover the ring. Alberich's brother Mime also lives in the forest, as he hopes to gain the ring. Sieglinde when being pursued by the ruler of the Gods Wotan for her incestuous relationship with her brother Siegmund is told to flee to the forest as Wotan doesn't like going there. She gives birth to Siegfried in the forest. He is raised by Mime, who hopes he will slay Fafner, enabling Mime to take the ring.

In Act 2 of Siegfried Wotan, in the guise of the Wanderer, approaches Neidhöhle and meets Alberich, who recognises him. They talk over the treasure, Alberich saying Wotan's contract with the Giants prevents him taking the ring and that when he takes the ring he will rule the world. Wotan tells Alberich of Mime's plans, then wakes Fafner so Alberich can put forward a suggestion to him. Alberich tells Fafner a hero is coming to slay him and that if he gives him the ring he won't die. But Fafner refuses the offer. Soon after Siegfried comes, wakes Fafner, and slays him. When he tastes the dragon's blood he gains the ability to understand birds and on this advice he enters the cave to take the ring and tarnhelm. Alberich and Mime confront each other, arguing over the treasure. Mime tries to drug Siegfried but due to the blood Siegfried knows Mime's true plans and kills him, while watched by Alberich. He puts Mime into the cave, then blocks it with Fafner's body. Hearing of a wife waiting for him from a bird he follows the bird away.