Sancho is confused regarding the identity of Knight of the Mirrors and the Squire of the Wood. His master tires to make him believe that the Squire of the wood is an enchantment rather than Sancho’s neighbor. He also believes that the Knight of the Wood is an enchantment that took on the form of Sampson in order to force Don Quixote to show mercy. Sancho knows that the apparent enchantment of Dulcinea was a lie, and so he is at a loss as to what to think now. While on the road, Sancho and Don Quixote meet Don Diego de Miranda, a gentleman donning all green clothing. Don Quixote introduces himself to this gentleman, informing him of the history that was published about his first adventures. Don Diego is amazed that knights-errant are still found roaming the country and is happy to her news of the book, which he believes could correct the nonsense found in books of chivalry. Don Diego tells the two men about his life. Sancho starts to believe that the man is a saint and accordingly kisses his foot. Don Diego talks about his son, who gave up study of the sciences in favor of poetry. Don Quixote delivers an eloquent speech on the value of poetry, which he says is like a delicate maiden. As they continue to talk, Sancho walks over to some shepherds to ask for milk.
Don Quixote notice a cart moving towards him. It is adorned with the king’s flags, and the gentleman hopes for another adventure. He calls Sancho, who puts the curds he has purchased from the shepherds into his master’s helmet. As can be expected, when Don Quixote puts on his helmet, the curds fall onto his face. He believes that his brain is melting. When he sees the curds in the helmet, he accuses Sancho of putting them there. Sancho insists, however, that an enchanter must have placed them there. Don Quixote calls for the cart to come over. The mule driver informs him that the cart is carrying two lions to the king. Don Quixote poses a challenge to the lions. Ignoring everyone’s protests, he insists that the cage be opened. Cervantes interjects, saying that Cide Hamete Benengeli praises Don Quixote’s bravery before he continues with the story. The others flee and the cage is opened. Don Quixote has “childish bravado” as he faces the lion. However, the animal simply stretches and flops down again. Don Quixote decides he will not provoke the lions. He calls to the others, telling them to come back. The lion tamer tells them the tale of Don Quixote’s valor. Don Quixote instructs Sancho to give some money to the lion tamer and mule driver. He then gives himself a new name: the Knight of the Lions. Don Quixote says that he is not as mad as he may appear, and that it is preferable for knights to be too courageous than to show cowardice. Don Diego extends an invitation to Don Quixote and Sancho to his home. Don Quixote accepts.
Don Quixote is warmly welcomed at Don Diego’s home. He meets the man’s son, Don Lorenzo. Don Quixote asks Don Lorenzo about his poetry. Don Lorenzo answers his questions, wondering whether Don Quixote might be mad. After a discussion on the merits of poetry, Don Lorenzo concludes that Don Quixote is indeed insane, but that he is still brave and very intelligent. Don |Lorenzo reads poetry for Don Quixote, who declares it is the best he has ever encountered. Don Lorenzo enjoys this praise, despite his conviction that Don Quixote is mad. Don Quixote remains with Don Diego for four days. After that, he goes in search of more adventures.
Don Quixote and Sancho see some students and peasants. They are on their way to a wedding. It the marriage of Camacho the rich and Quiteria the fair. The students inform Don Quixote about Quiteria, as well as a man called Basilio who loves her. They claim that Quiteria is marrying Camacho simply because of his money. During this conversation, two of the students argue about the merits of the study of swordplay. They challenge one another to a duel. Don Quixote will act as umpire in this confrontation. The student more advanced in the study is successful. As pointe out by the narrator, this shows that skill is always more important than strength. It is the middle of the night when the group gets to the village. However, Don Quixote insists that they sleep in the fields outside the village.
Don Quixote and Sancho reach the wedding, which is described in great detail by the narrator. While Sancho praises Quiteria for her decision to marry for wealth, Don Quixote does not.
Camacho and Quiteria arrive at their wedding. Basilio appears. He throws himself on his dagger. Even with his dying breath, he refuses to make his peace with god unless Quiteria will consent to marry him. The lady agrees. Basilio reveals that it was all a trick. He has not stabbed himself. A brawl begins but Don Quixote brings it to a halt, saying that it is not right to fight over wrongs carried out in the name of love. Quiteria and Basilio stay married, and Camacho comforts himself with the idea that Quiteria would have stayed in love with Basilio in any case. Don Quixote and Sancho depart from the party, to accompany the newlyweds.