The scene opens on a secluded beach on the coast of Cornwall, England, in the Victorian era. A raucous band of pirates is drinking and making merry ("Pour, oh pour the pirate sherry"). It is also Frederic’s twenty-first birthday, and as he is bound as an apprentice pirate until noon that day, his obligations to the group are almost over. The Pirate King congratulates him on being (almost) a full-fledged pirate, but Frederic confesses to the group that he plans instead to abandon the piratical life. Frederic’s nursemaid, Ruth, explains to the group that the lad wasn’t even supposed to be a pirate apprentice in the first place; when instructed to apprentice him to a ship’s pilot when he was eight years old, she misheard the instructions and instead bound him to a pirate ("When Frederic was a little lad").
Frederic then announces that, although he loves all of the pirates individually, he does not find the profession at all respectable and he feels honor-bound to henceforth devote himself to their extermination. The pirates tell him that they understand, especially given the fact that they can’t even make money in their piratical dealings. Duty-bound to be honest with the pirates until noon, Frederic explains to the pirates that the reason they are unsuccessful is that they are too soft-hearted; since all of the pirates are orphans themselves, they refuse to rob another orphan. This has become common knowledge among all their potential victims, and so everyone they attack claims to be an orphan and the pirates feel obliged to let them go. Frederic invites the pirates to come with him back to civilization, hoping that he will have no need to destroy them, but the Pirate King explains that piracy is a far favorable lifestyle to a “proper” profession ("Oh! better far to live and die…I am a pirate king!").
Since Frederic is about to leave, the pirates argue over what to do with Ruth; they decide to leave her fate to Frederic