Don Quixote, Sancho, and the scholar now seek a lodging. They are overtaken by a briskly walking man leading a mule laden with weapons. Barely greeting them, the man hurries past but says that if they meet at the same inn, he shall relate strange news. The next person they meet is a threadbare page who entertains them with his brief account of how he has been an ill-paid servant and is now ready to join a foot regiment and make his fortune as a soldier. Don Quixote makes a small speech at this point, again expressing his (and Cervantes') ideas of the virtue, nobility, and bright future of the life of a soldier. The young page accepts the knight's invitation to supper, and they arrive at the inn at nightfall.
Once at the inn, Don Quixote seeks out the man with the lances and halberds and listens to his tale of the braying adventure. Two aldermen of his village, he says, went to search in the hills for an ass that one of them had lost. They agreed to stand on opposite sides of the hill and bray in order to attract the lost animal. So naturally did they each bray that they met, not with the ass, but with each other. After exchanging compliments on their mimicry, they separated again to call the ass as before. Once more they brayed so perfectly that they met with each other. On their way home, they found the corpse of the ass half eaten by wolves. The entire village took up the story, and that night the whole town resounded with braying as the idle fellows played the joke. Neighboring towns carried on the jest; individuals from other villages greeted their friends of the aldermen's town by braying. The stranger concludes his story by saying that he is bringing these weapons to the place where members of his village, the Brayers, will be in the field against jokesters of a rival town.
Now Maestro Pedro, a puppeteer, arrives with his fortune-telling ape who will answer all questions about past and present. The newcomer calls Don Quixote by name, addressing him as the "glorious restorer of knight-errantry," and recognizing Sancho as well. The knight wishes to question the ape. He asks whether what he saw in Montesinos' Cave were dreams or realities. Maestro Pedro, interpreting the ape's whispers, says that some things were dreams, some realities. The puppeteer and his assistant now prepare the puppet show and the spectators take their places.
