Lord Goring recognizes Mrs. Cheveley, a former fiancée, at the party. He flirts with Mabel.
Lord Goring also recognizes a brooch (a.k.a. bracelet) he gave as an engagement gift long ago. Someone lost it at the party. He snatches up the bracelet, thinking that it will come in handy later.
Asked for his advice, Lord Goring says Sir Robert should come clean to Lady Chiltern. He advises Lady Chiltern to be a little less harsh in her judgments of her husband.
Lady Chiltern sends a letter to Lord Goring, so he expects her visit. Instead, he unexpectedly receives visits from his father, Mrs. Cheveley, and Sir Robert.
Sir Robert finds Mrs. Cheveley in Lord Goring's drawing room, and accuses him of treachery.
Lord Goring rejects Mrs. Cheveley's proposal of marriage.
He threatens to have her arrested for theft of the bracelet unless she gives up the incriminating letter about Sir Robert that she is using as blackmail. Lord Goring burns the letter. Mrs. Cheveley escapes with Lady Chiltern's letter in hand.
Lord Goring informs Lady Chiltern that Sir Robert is safe – but that she might be in danger.
He proposes to Mabel, who accepts.
When Sir Robert declines a Cabinet position, Lord Goring confronts Lady Chiltern: why is she forcing him into anonymity? He argues that she should forgive and support him. In fact, as Sir Robert's wife, she should support him in everything he does, especially given that he has a large sphere of influence.
Lord Goring asks for Mabel's hand. Because Sir Robert thinks he's involved with Mrs. Cheveley, he refuses. Lady Chiltern clears up the situation.