Sancho places the curds he bought into Don Quixote's helmet. Don Diego tells Quixote he thinks the wagon is merely transporting a gift to the king. Don Quixote says it never hurts to prepare for battle, for you never know when you will encounter enemies.
Sancho gives the helmet to Quixote without removing the curds. Quixote believes his brains are melting when he puts it on and feels the goo coming down his face. He assumes this coming adventure is a terrible one.
He realizes he has curds in his helmet when he wipes his face. Sancho says the Devil put them there. He tells Quixote that he thinks the evil enchanters play these tricks to turn master against squire. Quixote concedes this is possible.
Quixote asks the waggoners where they are going, what is in the wagons, and whose flags are flying. The waggoner says he is transporting lions, which are a gift from the Governor of Oran to the King. The man warns him the lions are very large and very hungry. He wants to continue on so they can arrive at the palace and be fed.
Quixote says he is not afraid of lions. He orders the man to open the cages and drive them out so he can fight them. Don Diego tries to persuade him from doing this. The lions are no threat to him. Quixote tells him that he knows his business and will decide what is a threat. Quixote threatens the waggoner, so he does as he is told. Sancho begs Quixote not to do this, but his master dismisses his fears. He does give permission to the carter to unharness his mules and walk them away from the place.
The waggoner opens the cage, but the male lion merely stretches and rolls on his stomach. Quixote orders the man to provoke the lion, but the keeper refuses. The lion will turn on his tormentor before he turns on Quixote. The keeper points out that if the rival (the lion) refuses to fight, then it is his disgrace. Quixote is the victor by default. Quixote agrees and allows him to close the door on the lion cage, so long as the keeper vouches that Quixote is the victor.
Quixote tells Sancho to pay the men for their delay. The keeper praises Quixote’s valor to the other men and tells how he struck terror in the lion. The keeper promises to tell the king. Don Quixote decides to call himself Knight of the Lions from then on.
Don Diego reprimands Quixote for being a madman, despite how rationally he can speak at times. Quixote tells Don Diego that a knight must constantly maintain an appearance of valor. It was necessary for him to challenge the lions. Don Diego suggests they make haste to his village, where he will put Don Quixote up for the night. Don Quixote accepts, calling Don Diego "The Knight of the Green Gaban."