The chapter opens with Selden in Monte Carlo. He is accompanying the Stepneys, the Brys, Lord Hubert Dacey, and Carry. Selden is informed that Lily is also in Europe, where she is vacationing with the Dorsets, and that she has been causing a mild sensation. Carry tells Selden that Lily appears 10 years younger, and that she has become a favorite companion of the Crown Princess of Macedonia. These revelations awaken Selden's hurt feelings over Lily, which surprises him as he believed he had recovered from his feelings of unrequited affection.
Carry and Selden go for a walk together, and she tells Selden that Lily once had prospects to marry a rich Italian prince during a visit to Europe five years earlier. She reveals that marriage documents were being prepared between the prince and Mrs. Peniston when Lily began flirting with the prince's stepson. Carry further gossips that Lily's current visit to Europe was prompted by Bertha's desire to have Lily distract Dorset while Bertha carried on a flirtation with Ned Silverton. Shocked and dismayed by the candid nature of the conversation, Selden excuses himself.
Upon catching the train back to Nice, Selden reemphasizes his resolve to avoid contact with Lily. As he boards the train, however, he is confronted by Lily, who is accompanying the Dorsets, Silverton, and Dacey to Nice in order to dine with the Duchess of Beltshire. He notices that Carry's assessment that Lily's beauty had blossomed while in Europe is correct.
In Nice, Silverton tells Selden that the trip to Nice was prompted by Lily's manipulation of Dorset. This manipulation, he tells Selden, was performed in open view of Bertha, who refused to hear any ill words against Lily. Silverton confides to Selden, however, that such actions could not help but injure Bertha's pride. In the meantime, Bertha's flirtation with Silverton reaches its apex when Selden observes the pair hailing a carriage for what the reader can assume will be a romantic tryst.
Wharton uses Selden's observations to satirize the idleness of the wealthy Americans in Europe. They are depicted as spending the majority of their time in indecision over where to eat. Furthermore, the wealthy are shown to be more interested in where they might be observed eating and with whom as opposed to what they will actually eat.
Carry divulges the pretentiousness of the upper class when she relates her observations of the Brys to Selden. She tells him that Bry would fare better in his attempts to enter society if Louisa would let him indulge his personal style rather than putting on airs and constantly correcting her husband.
Carry tells Selden about Lily's courtship with the Italian prince and subsequent flirtation with his stepson to illustrate her belief that Lily "works like a slave preparing the ground and sowing her seed; but the day she ought to be reaping the harvest she oversleeps herself or goes off on a picnic." This statement not only reveals Carry's belief that Lily is her own worst enemy, but it also indicates to the reader that Lily really does not wish to marry for money rather than love.
Selden's chance meeting with Lily on the train to Nice gives Wharton the opportunity to foreshadow Lily's fate. Selden observes that Lily is "on the edge of something — that was the impression left with him. He seemed to see her poised on the brink of a chasm, with one graceful foot advanced to assert her unconsciousness that the ground was failing her."
Silverton's discussion with Selden concerning Lily's behavior in Sicily also serves as an opportunity for Wharton to foreshadow Lily's destiny. According to Silverton, Lily's open manipulation of Dorset has served to injure Bertha's pride, an injury that will eventually cost Lily a valuable friendship and lead to her downfall.
gargote a diner that is considered too downscale by the American travelers in Europe.