When Madame Merle confronts Isabel about her role in Lord Warburton's departure from Rome, Isabel is shocked by Merle's presumptuousness—she sounds as though she is speaking as Osmond's representative, and not merely as a distant acquaintance of the family. Propriety would dictate that the entire incident is none of Madame Merle's business, but Merle brazenly questions Isabel about it as though she, and not Isabel, was Osmond's wife. Isabel feels again that Madame Merle plays a powerful and sinister role in her life. Upset, Isabel asks Merle what role she is playing and what her relationship to Osmond is; Merle replies that it is "everything." Isabel gasps and covers her face in her hands; Merle sardonically congratulates her for taking the news so well. She realizes that Mrs. Touchett was right: Merle did orchestrate her marriage to Osmond so that the two of them could have access to her money. Merle leaves, and Isabel goes for a long drive, alone, thinking about what she has learned. She recognizes that Osmond married her only for her money. After some time, she comes to pity Madame Merle for having fallen under Osmond's sway.
Osmond sits in Madame Merle's parlor, listening to his former lover tell him what has happened with Isabel. Merle is deeply upset by the way she acted, and she tells Osmond that he has caused her soul to wither—she is unable even to cry. Osmond argues that the soul cannot be harmed, and she says that, on the contrary, it can. He tells her that all women have monstrous imaginations, as if they were all bad novelists. He says that he really only wanted Isabel to adore him, and since she does not, he is content with the adoration of Pansy. Merle says longingly that she wishes she had a child, and Osmond cuttingly replies that she can live vicariously through people who do have children. Merle says that after all that has happened, something still holds them together. Osmond thinks that it is the harm he could do her. Merle says that he is wrong: it is the good that she can do him. Osmond leaves. Merle thinks to herself that she has made herself a monster, all for nothing.
The Countess Gemini is obsessed with gossiping about the extramarital affairs of women in Florence, even though she is now in Rome. To give her something else to think about, Isabel often takes her driving through the streets of Rome. One day, she and the Countess are on an excursion with Pansy when Isabel sees Edward Rosier, back from his mysterious trip. Isabel speaks to him alone, and he tells her that he has been away to sell his collection of art objects; he has raised fifty thousand dollars and hopes he will now be allowed to marry Pansy. Isabel tells him that Osmond intends to marry Pansy to a nobleman. Pansy approaches, and Isabel moves to intercept her. The Countess goes to speak to Rosier, and after some time, Isabel sends the coachman to retrieve her. But the Countess sends him back, saying that she prefers to speak to Mr. Rosier and will return home in a cab.
A week later, Pansy shocks Isabel by saying that her father is sending her back to the convent; the nuns will arrive for her that very evening. Osmond tells Isabel that there is something he wants to give Pansy the space to think about "in the right way." Isabel is not sure what Osmond is trying to accomplish, but she is stunned that he would go so far, simply to have his own way. At dinner that night, the Countess says to her brother that she believes he has banished his daughter to remove her from the Countess's influence, for the Countess admits that she has taken the part of Edward Rosier. Osmond replies harshly that if that were the case, he would simply have banished the Countess and allowed Pansy to stay.
Mrs. Touchett writes Isabel that Ralph is near death and asks Isabel to come at once. When Isabel tells Osmond this news, he forbids her to leave Rome, saying that if she does so, it would simply be an act of revenge against him. Isabel realizes that he sees the entire situation as merely an elaborate game, and in his paranoia, he believes that all her actions are calculated either to help him or hurt him. She asks what would happen if she defied him. He refuses to discuss it. Isabel tells the Countess what has happened; the Countess urges her to defy Osmond and leave Rome. But Isabel is haunted by the memory of her wedding vows, which she does not wish to break. The Countess tells Isabel that Osmond has lied to her: his first wife did not die during childbirth, because she was never pregnant. Pansy's mother is Madame Merle. Madame Merle and Osmond have been lovers for years; Osmond's first wife died around the time Pansy was born, so they simply claimed that she had died in childbirth and put Pansy in a convent. Merle chose Isabel to marry Osmond both because Pansy needed a mother—she dislikes Merle, her real mother—and because Isabel has money for Pansy's dowry. Isabel realizes that this explains why Merle was so upset when she thought Isabel had encouraged Warburton not to marry Pansy.
Isabel asks why Merle and Osmond never married. The Countess says that Merle always hoped to marry above Osmond and worried that if she married Osmond, people would realize that she had a child out of wedlock. Isabel feels intense pity for Madame Merle. Isabel says sadly that she must see Ralph and prepares to leave for England.
These chapters largely suspend the great problem at hand in Isabel's life—how to handle the conflict between Pansy's desire to marry Rosier and Osmond's resistance to that idea—and focus instead on unraveling the long mystery of the relationship between Madame Merle and Osmond. The reader has long understood that Merle and Osmond were or had been lovers, but when the realization strikes Isabel in Chapter 49, it is still quite a shock to her. The knowledge arrives after a slow buildup of tension in which Merle becomes more and more presuptuous and begins to treat Isabel more and more insolently about her role in discouraging Warburton to marry Pansy. At last, as if solely to hurt Isabel, Merle implies her intimacy with Osmond strongly enough for Isabel to make the connection.
But the mystery is still not complete until Chapter 51, when the Countess Gemini reveals that Madame Merle is Pansy's mother. This is likely to come as a shock to the reader as well as to Isabel, but it clears up a number of confusing points, such as why Merle was so dedicated to the idea of having Pansy marry Lord Warburton. It also clarifies the baffling exchange between Merle and Osmond in Merle's parlor, when Merle comments bitterly that she has no children of her own, and Osmond replies cruelly that she can still enjoy the children of others—he is taunting her for the fact that she is forever cut off from her relationship to Pansy. This exchange also brings out Merle's human side for the first time in the novel, and she emerges as a victim of Osmond's rather than as a pure villain in her own right. Isabel is able to pity Merle, and James seems to intend for the reader to share the feeling.
Edward Rosier's pathetic last gasp as a suitor is to sell his art collection, raise fifty thousand dollars, and appeal to Osmond's sister for help. He does not realize that without social status, his money is meaningless to Osmond and that Osmond holds his sister in complete contempt. Osmond's sudden, ruthless decision to return Pansy to the convent, essentially imprisoning her until she agrees to forget about Rosier, ends any possibility of a marriage.
But the scene in which Rosier speaks to the Countess among the Roman statues is still important in a way, because, by emphasizing the physical presence of the city of Rome, it underscores the moral geography of Portrait of a Lady. Though the novel is set entirely among Americans who live in Europe (Warburton is the only important character who is not of American ancestry), the expatriates certainly tend to take on the qualities of their surroundings, and the environments of different parts of Europe are extremely important to the novel. In fact, they take on symbolic meanings of their own, as we have seen. America represents innocence, capability, and optimism; England represents a natural mix of individuality and social convention; and continental Europe represents an extreme of human decadence combined with rigid social forms.
In a sense, the deeper thatIsabel goes into the continent, the more noticeable this trend becomes. Rome—the most ancient and historically important city in Europe, the center of both the Roman Empire and of the Catholic Church—is the most sinister city in the novel. It is very possible, in fact, to trace a moral trajectory from Albany to London, London to Florence, and Florence to Rome, with each new city representing a new degree of social rigidity and human cruelty in Isabel's life. In this way, James ties the moral themes of Portrait of a Lady to the physical locales of his characters and creates a trajectory of moral disintegration based specifically on the Isabel's physical travel throughout the novel.