Lucio, a flashy bachelor, and two other gentlemen discuss an international political development: the Duke appears to be in peace talks with the King of Hungary. The two gentlemen disapprove, because they are soldiers and war is their livelihood. Lucio compares the men to pirates who set sail toting the Ten Commandments and remove "Thou Shalt not Steal." One of the men replies that, just as pirates disregard the Bible's prohibition against theft, soldiers disregard the portion of grace that prays for peace.
This exchange sets the scene for one of the play’s central themes: the tension between virtue and obligation. In doing their job, pirates and soldiers are caught between conflicting systems of morality and obligation. As the play goes on, many of its characters will find themselves entangled in precisely these sorts of incompatibilities. Angelo, for example, will be unable to reconcile his lustfulness with his desire to serve as a moral leader; and Isabella, the play’s main character, will be torn between her sisterly obligations and her religious commitment.
The men's conversation turns to sexual innuendos, and they lob jokes about sexually transmitted diseases at one another. Lucio spots a “bawd,” or brothel proprietor, named Mistress Overdone approaching, and muses about how he has patronized her establishment.
The men’s bawdy banter underscores their conversation about the difficulties of behaving in a morally consistent way, and emphasizes the decay of sexual morality that has taken place in Vienna
Mistress Overdone tells the men that Claudio, a young man who is friends with Lucio, has been arrested and is condemned to be beheaded in three days' time for the crime of impregnating his wife-to-be, Juliet. Concerned, Lucio and the gentlemen leave to investigate. Mistress Overdone reflects that war, poverty, sickness, and punishment are diminishing her business.
This moment marks the introduction of the main dramatic conflict of the play: Claudio’s death sentence. Since Claudio’s plight is revealed in the context of a conversation focused on social ills such as war and disease, his sexual misbehavior is made to seem like a relatively minor transgression.
Pompey, a clown and an assistant to Mistress Overdone, arrives. He speaks briefly and comically about Claudio's arrest. Pompey then relays to Mistress Overdone that a municipal proclamation has been issued, calling for the destruction of brothels in the suburbs of Vienna. An affluent patron has ensured, however, that brothels within the city limits will stay open. Mistress Overdone, whose brothel is in the suburbs, laments that her business will be lost, but Pompey reassures her that he will remain her assistant and she will remain financially solvent, thanks to her long experience in the industry. The two bawds then exit the scene.
The new order to destroy suburban brothels indicates that Angelo is trying to effect meaningful moral change during his regency (just as the Duke hoped he would). However, the two bawds’ relative optimism in the face of this suggests that Vienna’s sexual vices will prove too entrenched to eradicate, that it’s not possible to just rule away people’s baser instincts. And soon it will be clear that Angelo can’t even control his own baser instincts.
Claudio is escorted on stage by the Provost, who is in charge of the prison. Claudio asks why he is being arrested, and the Provost informs him that he acts not in "evil disposition," but rather on Angelo's special orders. Claudio ruminates somewhat cynically that earthly authority is a sort of “demigod:” it enforces the law in the name of heavenly will, but it lacks the diving power necessary to distribute justice in a perfectly fair way.
Claudio’s outlook shows him to be a thoughtful and overall well-intentioned man who refuses to place too much stock in either worldly or heavenly minutiae. He is being disciplined for violating a religious formality, despite acting in the spirit of loving monogamy, and his understanding of the vagaries of earthly justice is surprisingly level-headed and wise, given his current predicament.
Lucio and the two gentlemen reappear; Lucio asks Claudio the reason for his arrest. Claudio explains that "too much liberty" and immoderation has led to his downfall. Lucio is struck by the poignancy of Claudio's words, but shrewdly remarks that he would still prefer the “foppery of freedom” to the “morality of imprisonment."
Claudio’s remarks highlight the tension between liberty and justice: too much individual freedom undermines justice and order. Lucio articulates a hedonistic take on this dilemma by favoring comfortable, if immoral, behavior, over the limits of justice.
Lucio guesses first that Claudio has committed murder, and is surprised when Claudio reveals that he is, rather, being so harshly punished for "lechery." Claudio explains that he and Juliet were monogamously devoted to one another, but had not yet finalized their engagement because Juliet had not yet been granted a dowry. They engaged in consensual sex, and this transgression was exposed when Juliet became noticeably pregnant.
As will become a recurring motif in the play, Claudio’s crime is characterized as relatively benign and certainly not serious enough to warrant a death sentence. By having consensual sex with his common-law wife, the only thing that made Claudio’s actions criminal or immoral was that he failed to satisfy the institutional formality of an official marriage.
According to Claudio, Angelo is likely handing down a steep and rarely-used punishment in this case so that he can demonstrate his unyielding authority and set an example to others who might have sex out of wedlock. Lucio agrees and recommends that Claudio seek the Duke's reprieve. However, Claudio responds that he has tried, but the Duke is nowhere to be found. Claudio then asks Lucio to alert Claudio’s sister, Isabella, in the hopes she may help him. Isabella has just joined a nunnery, and Claudio is optimistic that she may be able to persuade the authorities to free him. Lucio vows to find Isabella swiftly.
Lucio’s suggestion that Claudio appeal to the Duke implies that the Duke has shown himself to be an understanding and forgiving—if perhaps too lenient—leader. Angelo, on the other hand, lacks these qualities and instead seems to be ruling harshly out of a kind of rigid insecurity.