The time is midnight, and as the act begins a foghorn is heard in the distance. Tyrone sits alone in the living room, drinking and playing solitaire. He is drunk, and soon Edmund enters, also drunk. They argue about keeping the lights on and the cost of the electricity. Tyrone acts stubborn, and Edmund accuses him of believing whatever he wants, including that Shakespeare and Wellington were Irish Catholics. Tyrone grows angry and threatens to beat Edmund, then retracts. He gives up and turns on all the lights. They note that Jamie is still out at the whorehouse. Edmund has just returned from a long walk in the cold night air even though doing so was a bad idea for his health. He states, "To hell with sense! We're all crazy." Edmund tells Tyrone that he loves being in the fog because it lets him live in another world. He pessimistically parodies Shakespeare, saying, "We are such stuff as manure is made of, so let's drink up and forget it. That's more my idea." He quotes then from the French author Baudelaire, saying "be always drunken." He then quotes from Baudelaire about the debauchery in the city in reference to Jamie. Tyrone criticizes all of Edmund's literary tastes; he thinks Edmund should leave literature for God. Tyrone thinks that only Shakespeare avoids being an evil, morbid degenerate.
They hear Mary upstairs moving around, and they discuss her father, who died of tuberculosis. Edmund notes that they only seem to discuss unhappy topics together. They begin to play cards, and Tyrone tells Jamie that even though Mary dreamed of being a nun and a pianist, she did not have the willpower for the former or the skill for the latter; Mary deludes herself. They hear her come downstairs but pretend not to notice. Edmund then blames Tyrone for Mary's morphine addiction because Tyrone hired a cheap quack. Edmund then says he hates Tyrone and blames him for Mary's continued addiction because Tyrone never gave her a home. Tyrone defends himself, but then Edmund says that he thinks that Tyrone believes he will die from consumption. Edmund tells Tyrone that he, Tyrone, spends money only on land, not on his sons. Edmund states that he will die before he will go to a cheap sanatorium.
Tyrone brushes off his comments, saying that Edmund is drunk. But Tyrone promises to send Edmund anywhere he wants to make him better, "within reason." Tyrone tells Edmund that he is prudent with money because he has always had to work for everything he has. Edmund and Jamie, by contrast, have been able to take everything in life for granted. Tyrone thinks that neither of his sons knows the value of money. Edmund, delving into his deeper emotions, reminds Tyrone that he, Edmund, once tried to commit suicide. Tyrone says that Edmund was merely drunk at the time, but Edmund insists he was aware of his actions. Tyrone then begins to cry lightly, telling of his destitute childhood and his terrible father. Tyrone and Edmund, making amends, agree together on a sanatorium for Edmund, a place that is more expensive but substantially better. Tyrone then tells Edmund of his great theatrical mistake that prevented him from becoming widely famous: he sold out to one particular role, and was forever more typecast, making it difficult for him to expand his horizons and find new work. Tyrone says that he only ever really wanted to be an artist, but his hopes were dashed when he sold out to brief commercial success. Edmund begins laughing "at life. It's so damned crazy," thinking of his father as an artist.
Edmund then tells some of his memories, all of which are related to the sea. He reflects on moments when he felt dissolved into or lost in the ocean. He thinks that there is truth and meaning in being lost at sea, and he thinks he should have been born a "seagull or a fish."
This is the first time we see real interaction between Tyrone and Edmund, a relationship that has not been explored extensively in the play before this point. They argue much over Edmund's obsession with literature, and it becomes clear that Tyrone wishes to exert his authority over Edmund by dictating what Edmund ought to read. One of Tyrone's great dreams is to see his sons grow up to be like him, and he clearly thinks that Edmund's interest in literature leads him down a different path. Nevertheless, it is interesting that Tyrone and Edmund are both intellectual figures. Tyrone is fascinated by Shakespeare and the art of acting; he admits that his only dream was to be an artist. Edmund laughs at this simply because Tyrone tells Edmund that his pursuit of art will get him nowhere in life. Tyrone seems to be at conflict with his own interest in art as opposed to his son's interest in what Tyrone perceives to be bad influences.
We also see a new side of Edmund. We learn that he likes to take walks alone at night by the sea. To Edmund, the fog and the ocean hold a symbolic value similar to that of alcohol. Edmund feels like he can get lost in the ocean, as though he were getting drunk on liquor. The ocean, then, becomes a means of escape from the family in addition to alcohol and morphine. The constant sound of the foghorn throughout the night is a constant reminder of the symbolic value of fog in this play. The foghorn itself is intended of course to help direct ships through the fog to safety. The question for the reader is what will guide the Tyrone family through its foggy communication and relationships.