Don Quixote and Sancho spend the evening with a group of goatherds. As they eat and drink together, Sancho becomes drunk on the goatherds’ wine. Don Quixote tells the men stories of the “golden age,” a time in which virgins could roam freely and fearlessly. He declares that knights were created for the protection of these virgins’ purity. A singing goatherd appears. While Sancho protests, the others ask him to sing a love ballad to the group. Don Quixote’s wounded ear is dressed with a poultice by a goatherd.
Peter, a goatherd, arrives. He has news: Chrysostom, the shepherd-student, has died from his love of Marcela. Peter relays the story of Chrysostom, who was clearly lovesick, and Don Quixote interrupts on numerous occasions, correcting the inadequacies of Peter’s speech. Peter says that Marcela is a beautiful and wealthy orphan who gave up her good fortune for the life of a shepherdess. He says she is kind and modest, and that while she is charming to everyone she refuses to marry. This has made her be reputed to be cruel in matters of the heart. The goatherds urge Don Quixote to accompany them to Chrysostom’s burial the following day, and he says that he will. Everyone goes to sleep with the exception of Don Quixote, as he stays awake all night thinking of Dulcinea.
As they make their way to the funeral, a traveler called Vivaldo inquires of Don Quixote why he is donning armor in a peaceful country. Don Quixote instructs him in the principles of knighthood. Vivaldo thinks the knight’s lifestyle is similar in severity to that of a monk. Don Quixote explains that knights carry out the will of God, while monks pray for it.
Don Quixote and Vivaldo exchange views on knight-errantry, and Don Quixote expounds on the tradition calling for knights-errant to dedicate their lives to the protection of ladies rather than God. He explains that every knight-errant is in love, even if there isn’t any sign of it on the surface. He uses poetic language in describing Dulcinea. The group finds their way at the burial site. Six men bearing Chrysostom’s body appear. Ambrosio, Chrysostom’s friend, exalts the deceased in his speech, and Vivaldo requests that he keep some of Chrysostom’s poetry, even though the man asked that it be burned. Ambrosio asks Vivaldo to read aloud the one poem he has taken.
Vivaldo reads the poem he has chosen aloud. The piece praises the beauty of Marcela and laments what the deceased man saw as her cruelty. It ends with a dying wish of being received in the afterlife by famous characters in Greek mythology. Mercela appears after this, and she vows she has never given any suitor hope of gaining her affection. She blames her beauty on heaven and asserts that no fault can be found with her for remaining chaste. She then departs before Ambrosio is able to respond. Some of the group attempt to follow her, but Don Quixote threatens to kill any man who pursues her. He goes after Marcela himself, and offers her his services.
Don Quixote and Sancho stop for a while, to rest and eat. Rocinante walks off towards a group of mares owned by a group of Yanguesans, and he attempts mating with one of them. The horse is beaten by the Yanguesans. Don Quixote retaliates by attacking the many Yanguesans. He and Sancho are defeated in the battle. Still lying on the ground, Don Quixote and Sancho talk about balsam. This is the balsam that Don Quixote claimed knights apply to cure their wounds. Don Quixote ascribes their defeat to his drawing his sword against men who aren’t knights themselves, which violates the chivalric code. The two men argue about the value of fighting in a knight-errant’s life. Don Quixote instructs Sancho to lead him to an inn on his donkey, and Sancho complies. When they reach another inn, Don Quixote thinks it is a castle.