The dishonorable farmer’s son that seduced Dona Rodriguez’s daughter, and whom Don Quixote intends to challenge, has left the country. The Duke tells Tosilos, the lover’s footman, to take his place in the fight with Don Quixote. In the meantime, as Sancho and Dapple go towards the castle, they come upon a group of German pilgrims together with Sancho’s old neighbor, Ricote the Moor, who left the country when the king exiled the Moors. Ricote, who is making his way home to retrieve treasure he buried there, expresses his displeasure about how he has been separated from his family during his time of exile. Sancho talks to Ricote about his governorship, and Ricote inquires what Sancho got out of his time in government. Sancho says that he learned that is incapable of governing anything other than a herd of cattle.
Sancho and Dapple fall into a pit after seeing Ricote. They are trapped and cannot escape. Don Quixote discovers them there and finds others who can help to get them out. Don Quixote and Sancho make their way back to the castle, where Sancho informs the Duke and Duchess about how he has abdicated his governorship. The Duke claims he is grieved at Sancho’s decision, but that he will find a better position at the castle for him. The Duchess states she will get someone to take care of Sancho’s battered body.
The day of the duel arrives. The Duke takes off the steel tips from the lances so that neither combatant will be killed. He does other things as well to ensure that no one is seriously harmed. When Tosilos sets eyes on Dona Rodriguez’s daughter however, he falls in love with her and decides not to charge Don Quixote. Rather, he proposes marriage to the daughter. Believing that he is the farmer’s son, she accepts. However, she quickly discovers the trick. Don Quixote tells the Duke that an evil enchanter has caused this transformation. The Duke knows the truth, though, and locks up Tosilos.
As Don Quixote and Sancho say farewell to the Duke and Duchess, Sancho joyfully receives Teresa’s letters from the Duchess. The pair begins to leave. However, Altisidora, how is pretending to be devastated because Don Quixote is not in love with her, utters a curse against him. It is in the form of a sonnet. She criticizes what she says is his cruelty to her and accuses him of the theft of three handkerchiefs and a garter. When the Duke questions her, though, she admits that the garter is in her possession.
While on the road, Don Quixote and Sancho come across workmen bearing icons of saints to a church nearby. Don Quixote admires the icons. In a bit of forest beside the road, Don Quixote ends up entangled in some bird snares, which he thinks is an evil enchantment. The snares were set by two shepherdesses, who now appear. They invite Don Quixote and Sancho to come to a pastoral paradise that they and other villagers are attempting to create. Don Quixote turns down the invitation but is impressed by the idea. He vows that for two days he will stand in the middle of the highway, forcing all who pass to say that the two shepherdesses are the most beautiful maids in the world with the exception of Dulcinea. Soon after Don Quixote goes into the road to carry out his promise, however, a herd of bulls comes charging down the road. The herdsmen tell Don Quixote he must step aside. However, Don Quixote, Sancho, Rocinante, and Dapple are crushed.
Don Quixote and Sancho go to an inn. This time, Don Quixote does not mistake it for a castle. While eating supper, they come across two gentlemen who have read the fake sequel to the novel’s First Part. Don Quixote lets them know that the book is a fake and the men attack the book. Don Quixote also refuses to look at the book, wanting to avoid giving the its writer any cause to think that people are reading it. When the two men inform Don Quixote that the fake Don Quixote also went to Saragossa for a jousting competition, Don Quixote indicates that he will never go to that town again. He will go to Barcelona instead.
Tired of waiting for the disenchantment of Dulcinea, Don Quixote says that he has decided to whip Sancho himself. The two men argue. Sancho knocks the gentleman down and, before allowing him to get up again, forces Don Quixote to swear that he will refrain from whipping him. Don Quixote and Sancho then come across a band of thieves who steals their money. However, the thieves are ordered by their leader, Roque Guinart, to give back the money. Roque has read the stories about Don Quixote and recognizes him. He explains he never thought he was a real person.
After a short meeting with a distressed young woman who has murdered her lover as a result of mistaken jealousy, Roque lets a group of wealthy people keep most of their money. He even gives some money to two poor pilgrims that are traveling by their side. Roque kills one of the thieves for complaining about his generosity. Roque sends a letter to a friend who lives in Barcelona. This is to alert him to the imminent arrival of Don Quixote.