Judy has also heard of the financial arrangement between her husband and Lily, and disassociates herself from Lily. Lily attends a social function at the home of Mr. and Mrs. Wellington Bry, two nouveau riche socialites. She poses in a tableau vivant, and her beauty is made apparent to all who attend. Selden professes his love for Lily, but she rebuffs him. The following evening, Lily meets with Trenor. Trenor feels that Lily owes him her physical affections for his financial assistance. Feeling violated, she leaves, and spends the night with Selden's cousin, the virtuous and physically undistinguished Gerty Farish, a kindly and charitable woman who has recently discovered that she is in love with Selden. The following morning, Lily determines that she will repay Trenor. She rebuffs another proposal from Rosedale and waits for the arrival of Selden. She discovers that Selden has gone to Europe and receives an invitation to join the Dorsets on a Mediterranean cruise.
During the cruise, Lily is a success with the European crowd, much to the dismay of Bertha. Bertha wishes to employ Lily as a means to distract her husband, George Dorset, while she engages in a flirtation with Ned Silverton. When Silverton and Bertha miss a train back to where the Dorsets' yacht is docked, Dorset and Lily return without them. Bertha returns to the yacht at seven o'clock the following morning. In order to excuse her absence, she insinuates that Lily and Dorset parted without her and Silverton in order to indulge in their own flirtation. Lily is told she must not return to the yacht.
The European stories regarding Lily's activities reach America and Mrs. Peniston, who dies leaving only $10,000 to Lily, a legacy that will take some time before being fulfilled. Rejected by her friends for the perceived indiscretion with Dorset, Lily finds work with the Gormers. Bertha, however, befriends Mattie Gormer, and Lily is soon out of work. She then finds work as a secretary to Mrs. Norma Hatch, a divorcée and recent addition to New York's wealthy elite. Norma has designs to marry Freddy Van Osburgh, a member of Lily's previous social group. Fearing charges of impropriety, Lily quits her job. She works, ineptly, at a millinery shop, and is laid off. Her mounting bills and increasing sleeplessness cause her to rely on chloral (chlorinated ethyl alcohol) in order to rest and forget her financial worries.
Lily resumes her contact with Rosedale, who offers to marry her if she uses Bertha's letters to Selden to even the score with Bertha. After some consideration, Lily begins to take the letters to Bertha, but she has an attack of conscience and visits Selden instead. She deposits the letters into the flames of a fire in his apartment. Neither Selden nor Lily can profess their love, and she leaves his apartment. The following morning, Selden realizes that he still loves Lily. He goes to her boardinghouse to tell her, but is greeted by Gerty, who tells her cousin that Lily has overdosed on chloral the night before and is now dead.
