Caliban is with Trinculo and Stefano, and they're all still pretty drunk. Stefano promises that Caliban will be lieutenant on his island, and Caliban promises to lick Stefano's shoe. Fair trade.
Trinculo and Caliban get into a little tiff, and Caliban demands that Stefano defend him against Trinculo. Caliban then reminds his two new friends of what he told them earlier: he has been subject to the tyrant sorcerer Prospero, who has wrongfully stolen the island from him.
Meanwhile, the invisible Ariel has entered, and whispers things like "thou liest!" Seeing no one, Caliban and Stefano think Trinculo is the one whispering, so they beat him up.
Caliban instructs Stefano of what must be done to kill Prospero and gain power over the island. Caliban will lead them to Prospero's favorite afternoon nap spot. If they steal his books, Prospero will be powerless, and then they can nail him in the head, or something.
Caliban promises that all the pretty linens and things in Prospero's house will belong to them, and, best of all, Stefano can have the beautiful Miranda, who will "become thy bed, and bring thee forth brave brood" after they've murdered her father. Not cute.
As they get ready to find and murder the magician, Ariel enters playing a tune.
Trinculo and Stefano are frightened by the song that comes from nowhere, and ask for forgiveness from Heaven.
Caliban reassures them that the island is full of sweet noises, and gives one of the most beautiful speeches in the play, speaking of wonder and dreams.
All agree to follow the song, which they hope will lead them to Prospero, so they can do their awful deed.