Author recounts how Master Pedro was really Gines de Pasamonte, one of the galley slaves freed by Don Quixote. The former prisoner was also responsible for stealing Sancho's Dapple, which the author neglected to mention in the first book. Sancho eventually recovered Dapple, and Gines fled to Aragon. There, he put a patch over his left eye and became a puppeteer. He bought the ape and trained it to whisper into his ear with a certain sign. When he came to a village, he made a point of learning the gossip about people. He became famous and wealthy.
Don Quixote resumes his journey and comes across the battle between the braying town and its rivals. He tells them that they are mistaken in taking up arms. Nobody can insult an entire town. There are only four reasons to take up arms: defending your religion, defending your life, defending your honor and family, and going to war under the king's banner or defending your country. He reminds them that the bible orders you to love your enemies. Sancho advises the people to follow his master's advice.
One of the men thinks Sancho is mocking them, so he strikes the squire with his lance. Don Quixote goes to defend Sancho, but the others attack him. He flees. The people allow him and Sancho to go. The other town doesn't show up for battle, and the braying town feels victorious.