They come across a field of windmills, which Don Quixote sees as a group of giants. He tells Sancho he is going to slay them and take their riches. Sancho tells him they are not giants but windmills. Don Quixote retorts that Sancho is not experienced in these matters, and that is why he can’t see that they are clearly giants.
Sancho tries to dissuade Quixote, but he races towards the windmills. The windmills start to move as he approaches, for a wind picks up just then. He attacks one of the windmills, damaging his spear and acquiring more injuries.
Sancho comes to his aide. He tells Quixote that it was foolish to attack a bunch of windmills. Quixote tells him that the evil magician Freston changed the giants into windmills to deprive him of his victory.
Don Quixote mourns the broken lance. However, he remembers a tale where a knight tore a limb from an oak tree and used that. He planst to do the same.
Sancho likes his new life, which is easier and pleasant. Don Quixote takes a limb from a tree where they make camp. He spends a sleepless night thinking about Dulcinea. Sancho sleeps heavily in a drunken stupor.
They arrive at the Pass of Lápice. Quixote tells Sancho that the laws of chivalry state that his squire can only fight in battles against normal scoundrels. If the battles are with other knights, he must not interfere. Sancho promises to adhere unless the knights threaten him.
Two friars appear with a coach behind them that is carrying a Biscayan lady who is going to visit her husband, who is about to set sail. The friars are not with the party, merely traveling the same road.
Quixote believes the friars are wizards abducting a princess. Sancho tells him that they are monks, and the coach is some travelers. Don Quixote reminds Sancho that he is inexperienced at adventuring.
Don Quixote orders the friars to release the princess. The monks are bewildered, but identify themselves as Benedictine monks. They are ignorant of who is in the coach. Quixote, not believing them, attacks. He would have killed the first monk if the man had not fallen off his donkey. The second monk races away. Sancho goes up to the fallen monk and disrobes him, for his clothing are the spoils for his master. The servants of the monks attack Sancho and leave him stunned. The monk gets on his donkey and speeds towards his friend, who is watching at a safe distance.
Don Quixote goes up to the Biscayan lady and tells her he has liberated her. He asks that she present herself to Dulcinea and tell her of his deed. A squire with the coach, who can’t speak the language well, tells Don Quixote to leave them alone—or he will kill him.