When the army returns, the town of Messina celebrates their arrival. Leonato welcomes everyone back from battle, including Don John, the half-brother of Don Pedro who recently tried to start a failed revolt against his own brother. Don John and his associates Conrade and Borachio thank Leonato for his hospitability, but keep at a cold distance while the rest of the army and citizens enter the city.
When the guests arrive for the party, Don Pedro follows the plan of talking to Hero for Claudio. While Claudio waits, Don John - who is jealous of Claudio's popularity with his brother - lies and tells him that Don Pedro is actually going to steal Hero for himself. Claudio becomes upset and feels embarrassed that he fell for Don Pedro's trick. Benedick comes over to try and cheer the mistaken Claudio up, but doesn't succeed, so instead he just ends up talking about how Beatrice hurt his feelings.
Don John is once again frustrated that his plans to meddle and cause a disturbance for his brother and his friends failed. Borachio, a friend to Don John, pitches a new idea. Borachio and Margaret, one of Hero's friends and gentlewomen, have a pretty flirty relationship. He thinks that he can be seen with Margaret in Hero's room and convince Claudio and Don Pedro that it's actually Hero being disloyal. Don John loves the idea and pays Borachio for his work.
The next day, Benedick is once again talking about how he could never find a woman he'd fall in love with. He overhears Don Pedro, Claudio and Leonato walking near and decides to hide and listen to their conversation. Knowing he's nearby, Don Pedro, Claudio and Leonato start to talk about how much Beatrice is in love with Benedick (much to the surprise of Benedick).
Friar Francis, who was supposed to officiate the wedding, steps up to the defense of Hero against a frustrated Leonato. Friar Francis crafts a plan to fake Hero's death until her name is cleared to make Claudio and Don Pedro feel guilty about their actions. Hero and Leonato agree and leave with him.
They confess their feelings for one another. Beatrice asks Benedick to defend her cousin's honor and "Kill Claudio." At first Benedick refuses, but after Beatrice gives an impassioned speech about how society won't let her fight Claudio herself, Benedick agrees. He leaves to challenge Claudio to a duel.
Leonato and Antonio bump into a distant Don Pedro and Claudio on the street. They both challenge him, but Claudio refuses to fight the old men. They tell Don Pedro and Claudio that Hero has died of grief while Borachio confesses to everyone how he helped play a hand in the action. Everyone learns that Don John has fled Messina to avoid any fallout.