Othello is a wreck. He's watching Desdemona sleep, and telling himself over and over again that he has to go through with this. He promises he won't mar Desdemona's beautiful skin by cutting her up or anything—she'll be pretty in death.
Next he notes the single candle he's brought into the bedroom. He plans to put out his candle, and then put out her candle (meaning, kill her). He muses that if he puts out the literal candle, he can easily light it again, but once he kills Desdemona, there is no way of getting her back.
During his moment, Othello is almost overwhelmed by his love for Desdemona as he bends to kiss her. He says her beauty is almost enough to stop him from being an agent of justice. Notice how we said "almost" twice? Well, so did Othello, because feelings aside, he promises to kill her and love her after. He weeps over her, lamenting that he must kill what he loves most, alluding to the Biblical passage Hebrews 12:6: "For whom the Lord loveth he chasteneth."
All this weeping and kissing and murderous plotting wakes Desdemona. Sleepily, she asks Othello if he's coming to bed. He asks her if she has prayed. "I would not kill thy soul," he says (5.2.32). (Think Hamletagain, like when Claudius almost dies.) Desdemona freaks out about the killing bit, and Othello doesn't deny that, yes, he intends to kill her. He again asks her to think on her sins, so she can be absolved before she dies (and so go to Heaven instead of Hell).
Othello then brings up the handkerchief (which we've dubbed the handkerchief of death). He accuses Desdemona of giving it (among other things) to Cassio, and she tries to be very calm in convincing Othello that he has made a mistake.
She denies ever having loved Cassio. Othello says that she's lying and that Cassio is already dead. Desdemona mourns Cassio, whom she says has been betrayed.
Still, she won't stop fighting for her life. Rather than come out with the story of having simply lost the handkerchief and try to clear up the whole matter, she begs to be banished rather than killed—to be killed tomorrow—to be given just half an hour more to live. But Othello is relentless, and smothers her with a pillow.
Emilia knocks at the door and calls out for Othello. Desdemona is still not quite dead, so Othello smothers her a little more. He gets lost in his thoughts about how he has no wife.
Finally inside, Emilia reports (wrongly) that Roderigo has been killed by Cassio, and that Cassio is wounded, but not dead. Othello is furious to realize that Cassio is still alive. But so is Desdemona—for at least three more seconds. "O falsely, falsely murdered!" she says weakly (18.104.22.168).
Desdemona declares she is guiltless, but when Emilia asks her who murdered her, she refuses to name Othello. "Nobody. I myself," Desdemona says. Desdemona finally dies asking Emilia to give Othello her love (5.2.125).
Othello admits he killed Desdemona and tells Emilia she deserved it, and that honest Iago, Emilia's own husband, can tell her all about it. "My husband?" (22.214.171.124)
Emilia keeps repeating this, as the truth slowly dawns on her that she married a jerk. Othello tries to get Emilia to calm down, mostly through his threatening looks, but she says she doesn't care about any harm he can do her. She continues to shout about the murder.
Soldiers and citizens of Cyprus crowd into the room, along with Iago. Emilia confronts her husband and asks if he told Othello that Desdemona was cheating on him. Iago admits that he suggested this, but then claims that Othello's own suspicion filled in all the blanks.
Emilia continues to lament Desdemona, and Othello continues to insist that Desdemona was false to him.
Gratiano then announces that it's a good thing Desdemona's dad, Brabantio, died of heartbreak over her wedding to Othello, because he really wouldn't have survived this traumatic event.
Othello continues to lay blame on Desdemona's foulness, and Iago keeps trying to silence the lamenting Emilia. Finally, the whole story clears up when Othello says that he saw Desdemona's handkerchief in Cassio's hand, and Emilia tells him that she herself stole the handkerchief and gave it to Iago.
With this small fact, Iago's whole story begins to unravel. Othello, furious, tries to stab Iago, but Iago avoids him, and instead stabs his wife to death (seemingly), and runs out. Montano bids someone to follow the villain, but only Othello and the slow, dramatically dying Emilia are left.
Emilia wonders aloud about the meaning of Desdemona's final song, and she herself dies singing about willows, charging "the Moor" with some serious cruelty. Emilia dies next to Desdemona and tells Othello with her last breath that his wife was pure and faithful to him.
Othello remembers that he has another weapon in his bedroom. He finds a Spanish sword and calls to Gratiano to say he's coming out. Gratiano says no way. Othello will pay dearly if he tries, especially since he's unarmed. (Gratiano doesn't know he has a sword.) "Oh yeah?" says Othello. "Open the door and say that to my face."
Gratiano enters the bedroom and Othello shows him his weapon. Othello says he could easily take Gratiano down if he wanted to, but that's not his fate. He tells Gratiano there's no reason for him to be fearful even though Othello is armed, because Othello has reached the end of his journey, a.k.a., his life. He looks at Desdemona lying on the bed and says that when he dies, he'll go to hell for what he's done to her.
Lodovico, the wounded Cassio, and Montano enter with a recently captured Iago. Othello pronounces Iago to be a devil (even though he doesn't have cloven feet), and wounds him. Iago lets us know that he's not dead yet. Othello responds that he wouldn't wish such a peaceful fate as death on Iago (as Othello is preparing to meet such a fate).
As Lodovico points out that grieving doesn't get you out of a murder charge, Othello says he can be called a murderer, but it's important to note that he did everything out of honor, not hate. He apologizes to Cassio for his bad behavior and then demands to know why Iago chose to torment him and ruin his life. "Demand me nothing. What you know, you know," Iago says. "From this time forth, I will never speak word" (5.2.300-301).
Lodovico then brings out the papers that will clear the entire mess up. Roderigo, conveniently, had a bunch of mixed letters on his person that explain, in detail, Iago's complicity in all of these plots.
Othello, finally faced with Cassio, learns that Desdemona was innocent and that everything that happened was part of Iago's scheme. And Roderigo lived long enough to reveal that his murderer was actually...Iago.
Lodovico orders that Othello be brought back to Venice for his punishment, and announces Cassio is to replace him. Othello wishes to say a word before he goes. He asks that he not be spoken of untruthfully, or in malice, as this tragedy is committed to history.
Othello declares himself "one who loved not wisely, but too well," and then sums up the bulk of the play—how he didn't get jealous quickly, but once tricked he was driven to madness. In his final note, he pulls out a hidden weapon and stabs himself, the same way he once stabbed a Turk he saw beating up a Venetian.
He has done an evil thing, but by killing himself, he has conquered the villain (himself) and therefore become the hero of his own story. Othello kisses Desdemona's dead lips and then dies himself, a murderer, martyr, and lover to the end.
Lodovico tells Iago to look at his work: three innocent people lying next to each other, all destroyed by his scheming. Still, Iago keeps his promise and stays silent.
Gratiano is to inherit all of Othello's worldly goods, and Montano is charged with punishing the wicked Iago. Sadly, Lodovico decides that all he can do is go back to Venice to share this tragic tale.