At the tavern in Eastcheap, Falstaff and Bardolph screw around in their usual way. Falstaff mockingly recounts his activities for the past week – he gambled no more than seven times, went to a brothel no more than once every fifteen minutes, and so on.
The trash talking continues.
Mistress Quickly enters. Falstaff asks her if she found out who picked his pockets while he was "sleeping." When she says "no," Falstaff accuses her of lying.
Quickly and Falstaff argue. She accuses him of trying to worm his way out of paying back the money he owes her (she bought him some clothes and he's run up a huge tab at the tavern).
Falstaff refuses to pay and says his ring, a family heirloom, was stolen.
Quickly replies that even Prince Hal has told Falstaff the ring is worthless – it's made from copper.
Falstaff begins to talk smack about Prince Hal, threatening to kick his butt if he were present.
Speak of the devil. Prince Hal enters with Peto. Falstaff and Quickly whine to Hal and about the argument.
Falstaff says the tavern has turned into a brothel – his pockets were picked and his money and ring were stolen.
Mistress Quickly tattles on Falstaff for talking trash about Hal behind his back. Falstaff and Mistress Quickly trade rude insults.
Hal calls Falstaff a "whoreson impudent embossed rascal" and reveals that he, Prince Hal, was the one who riffled through Falstaff's pockets while the old man was passed out. Besides, there was nothing in the pockets but receipts from bars and brothels along with some candy.
Falstaff recovers by telling the hostess he "forgives" her and then tells her to go make him some breakfast.
Prince Hal tells Falstaff that he's paid back the money their crew stole from the king's treasury at Gads Hill.
Then Hal informs Falstaff that he's hooked him up as a Captain – Falstaff will organize and lead a company of soldiers to fight at Shrewsbury.
Hal sends Bardolph on an errand and tells Peto get their horses ready. They'll all meet up later and Hal will give Falstaff money to recruits and furnish troops.