The curate convinces the troopers that they cannot detain a madman. They should rather allow himself and the barber to conduct Don Quixote back to his village where he might be cured, accompanied by a couple of the police officers. Meanwhile, the separate members of the inn's company prepare to leave, happy at the new prospects that the reunions and chance meetings have revealed. The curate pays the barber for the basin, the dispute of the packsaddle being settled; he compensates the innkeeper for the loss of his wineskins and the wine, and hires a wagon to convey Don Quixote in an oxcart. Constructing a kind of cage with wooden bars and a straw floor, the curate and the barber quietly convey the sleeping knight to this vehicle, which is then placed on the oxcart. The Don is too amazed to resist or cry out. In a disguised voice, the barber explains that the "Manchegan lion," the flower of knight-errantry, is now to be conveyed to La Mancha, where he will unite with the "Tobosan dove" and produce brave cubs after the knight's own image.
Don Quixote wonders at his enchantment, for knights-errant, he says, are usually swiftly carried in a sky chariot or on the back of a flying beast. At one point in the slow journey, they are overtaken by horsemen heading for a nearby inn. The newcomers, a group of clergymen, wonder at the strange manner of conveying a prisoner of the Holy Brotherhood, and the canon listens attentively as the curate relates the strange history of Don Quixote and his madness. The canon responds by discoursing on the evils of reading books of romances, for, he says, they neither instruct nor provide their readers with a sense of beauty. For all that, he continues, they have one grace, for they are unlimited vehicles for an author to try his skill at depicting various imaginative happenings and fantastic characters.
The canon now includes a critical appraisal of drama in his discussion with the curate. He says that the plays written for the modern theater are devoid of graceful writing or dramatic development because the public is only interested in spectacle and fast action. Furthermore, he says, the comedies that are played are loosely constructed in terms of historical accuracy, chronological sequence, or moral truth.
While the curate and canon are so engaged, Sancho has a shrewd talk with his encaged master. He declares that the town curate and barber are playing a shameful trick, and that if Don Quixote were truly enchanted the natural functions of his body would be suspended. The knight admits that he is in need of physical relief because his bodily functions are operating, but he counsels his squire to understand that enchantments always take different forms, according to circumstance. The curate may appear to be a familiar person, but he is in fact a powerful necromancer. Sancho seeks permission for his master to be uncaged in order to relieve himself, and while Don Quixote is gratefully relaxing on the grass, he engages with the canon in conversation about books of chivalry. To all the clergyman's accusations that the novels are untruthful and therefore pernicious, Don Quixote declares that every incident therein depicted and each person discussed is in the image of truth and is documented in history.
To prove his point, Don Quixote describes for the canon an imaginative incident from his readings, where a knight dives into a burning, creature-filled lake only to find himself on a rich estate and served by lovely damsels in a magnificent castle. Furthermore, declares Don Quixote, in a few days, I shall myself expect to be made a king of some realm or other by grace of my valorous arm, and shall reward my squire, "who is the best little man in the world," with an earldom. The canon can only marvel at the extravagant fancies of the madman. Suddenly, a fugitive she-goat bursts through the underbrush and joins them. The goatherd follows, talking and scolding the beast as if it were human. To explain this manner of speaking, he prettily tells a story.
The goatherd says he has fallen in love with a lovely young damsel named Leandra. He is not the only suitor, however, for a rival named Anselmo also wishes to marry the maiden. Unfortunately, Leandra allowed herself to be abducted by a boasting braggart who has turned her head with his dandyism and tales of heroic deeds in the army. When a search party finds Leandra, she is in a cave by the road, abandoned by her false lover, despoiled of all her material goods, though with her virtue intact. Leandra is shipped off to a nunnery by her doting father, while the two rivals, Eugenio and Anselmo, have become goatherds, cynical and mournful for the weaknesses of femininity.