London is an ancient city; at the time of Twain's story, it is fifteen hundred years old and filled with a hundred thousand people — or maybe twice that number. The streets are narrow, crooked, and dirty, and in the part of town where the Cantys live, the streets are even more narrow, even more crooked, and are dirtier than most streets. The Cantys' house in Offal Court, out of Pudding Lane, is filled with the poorest of London's poor. The six members of the Canty family live in one room on the third floor of an old, decaying house. There is a bed for the parents, tucked in a corner, but "Tom, his grandmother, and his two sisters, Bet and Nan, were not restricted — they had all the floor to themselves, and might sleep where they choose." As a result, they sleep on some bundles of dirty hay that can be kicked back into a corner the following morning.
Tom Canty's father and grandmother are thieves and beggars — and are also often drunk and violent. They make the children beg, which the children do, but they will not steal. Life is hard; Pudding Lane and Offal Court are both drunken, brawling, riotous places, but young Tom Canty is largely unaware of how really bad his life is. He goes out in the morning and begs; if he returns empty-handed, he is roundly cursed, then beaten. Thus he begs enough to save himself from being beaten, but he spends most of his time listening to Father Andrew's old tales and legends. Father Andrew teaches Tom and his sisters "the right ways," and, in addition, he teaches Tom how to read and write and also some Latin. Father Andrew's tales fill Tom's mind and take away some of the pain of the beatings and hunger which the boy must endure, and they also feed Tom's desire to be clean — in body, mind, and spirit. For example, he sometimes pretends to be one of the princes in Father Andrew's tales, and he has come to gain a measure of stature among both the children and the adults who bring him their problems; they are quite often amazed by the wisdom with which he solves their troubles. Meanwhile, however, Tom harbors a deep, secret desire: to see a real prince.
One January day, Tom wanders through the city, aimlessly ambling farther and farther from home than ever before. Eventually, he finds himself outside the walls of London and on the Strand, where there is a scattering of the palaces of the rich. Aghast at what he sees, he walks into Charing Village, past the cardinal's palace and goes on toward Westminster, a vast building with colossal granite lions and other signs and symbols of English royalty. When he comes to the fence surrounding Westminster, he catches a glimpse of the sturdy, tanned, beautifully-dressed Prince of Wales.
The noise of a soldier pulling Tom from the fence attracts the attention of the prince, who invites Tom into the royal grounds. The young prince takes Tom into a richly appointed apartment, treats him wonderfully, and feeds him all sorts of delicious treats. He asks many questions about Tom's life and is upset by what he hears, but he is fascinated by the stories of race and other sports played in Offal Court that Tom tells him about. The prince is as curious about Tom's life as Tom is by what he has seen of the prince's life. Impulsively, the two boys decide to exchange clothing and they discover, afterward, how very much they look alike.
Discovering a bruise on Tom's hand, the prince dashes out to reprimand the guard, but Edward forgets that he is wearing Tom's rags and he is treated like an upstart and a beggar. Furthermore, he is immediately hustled off to London in the midst of a hooting and shouting crowd.
Chapter 2 emphasizes the environment in which Tom Canty has been brought up. The name of the area — Offal Court means "refuse" and "defecation" and is the home of London's most wretched and poor. In spite of his environment, however, Tom possesses a certain intelligence and sensitivity, and he attempts to escape from the miseries of his surroundings by unleashing his imagination and living in a world of fantasy, a world in which he pictures himself to be a part of the "charmed life of a petted prince in a regal palace." His dreams, in fact, cause him to try to be clean and to hope someday to be clothed in something other than the rags that he wears. This, of course, prepares us for the exchange he will later make with Edward, Prince of Wales. For example, in his dreams, Tom has imaginary Lord Chamberlains and other court officials to serve him, roles played by friends of his. This portends Chapter 32, "Coronation Day," a chapter that describes a procession in which Tom rides with a real Lord Chamberlain; as they pass Offal Court, Tom looks out and sees the boys who used to be his imaginary Lord Chamberlains. Small details such as this suggest the careful planning and plotting that went into the making of the novel. Likewise, in terms of the plot, Tom is taught by Father Andrew how to read and write Latin. This will later cause consternation among the officials of the court, since the real prince knows Latin, Greek, and French, while Tom Canty knows only Latin. Also in anticipation of later events in the novel, when Tom assumes the role of king, he is called upon to give advice to many people; already, we see that in this early chapter of the novel, because of his dreams and Father Andrew's moral tales, Tom is sought out by all sorts of people in Offal Court in order to give various types of advice which he is very successful at doing. Basically, then, Tom's dreams, his sensitivity, and his study of Latin all contribute toward making it somewhat feasible for him to be mistaken for a real prince.
In Chapter 3, it is Tom's dreaming which causes him to wander aimlessly through the city until he finds himself staring through a fence at a real, living prince. When Tom is abused by a soldier, the Prince of Wales rebukes the guard. Thus, our introduction to the Prince of Wales is through his protesting a simple injustice against a citizen of England. This prepares us for Edward Tudor's development into a good, humanitarian prince. In contrast to Tom Canty, whose dreams involve being a prince, the Prince of Wales dreams of the freedom to do all of the things that Tom does.
One of the main intellectual points of Twain's novel (and also a maxim that remained one of Twain's favorites throughout his career) is the notion that clothes do not determine a person's worth, his character, or his nature. As the Prince of Wales says to Tom, "Thou hast the same hair, the same eyes, the same voice and manner, the same form and stature, the same face and countenance that I bear. Fared we forth naked, there is none could say which was you and which the Prince of Wales." Consequently, for a joke, they exchange clothes.
In terms, then, of the plot, when the prince notices the bruise upon Tom's hand, he immediately goes out to rebuke the soldier. However, dressed as he is in the clothes of a pauper, he is mistaken for a pauper, reemphasizing Twain's point about the absurdity of evaluating a person merely by the nature of his clothes.
Also in terms of the plot, the prince, before leaving, quickly puts away "an article of national importance that lay upon the table." Plotwise, this insignificant action will ultimately become the means whereby the real prince is restored to his rightful position. Throughout the novel, this article — the Great Seal of England — is an item that plays an important role involving both Tom and the prince.
One line of narrative development that perhaps should be noted already is the fact that when the prince, dressed in rags, demands that he be treated as a prince and orders people to serve him, he is treated as a ruffian and as a knave. However, later in the novel, when he asserts himself less strongly, he is accorded better treatment. The prince utters the truth: "I am the Prince of Wales; my person is sacred; and thou shalt hang for laying thy hand upon me!"
Later on, Miles Hendon will consider such exclamations to be part of a "World of Dreams and Shadows."