Prince Myshkin is a bit late for his appointment with General Ivolgin, who tells the prince nervously that he has broken all relations with Lebedev. The general's reason is that Lebedev told a ridiculous lie that he has a wooden leg because one of his real legs was blown off during the War of 1812. General Ivolgin thinks that Lebedev, in lying so obviously, is hinting at the general's own lying and is therefore being disrespectful to him.

Myshkin tries to convince the general that Lebedev merely meant it as a joke, but the general is not persuaded. General Ivolgin then goes into yet another lie, telling the prince he served as Napoleon's page when the French were in Moscow. Myshkin goes along with the story, thinking he is making the general happy; indeed, the general does leave in high spirits. Later, however, General Ivolgin realizes the prince did not truly believe him, and he feels humiliated. After the fight with Ganya, the general leaves his family. Kolya runs after him and tries to convince him to return. Suddenly, the general begins to continuously repeat a lie from his Napoleonic story like a broken record—he has had a stroke.

It turns out that when Varya told Ganya that the Prince and Aglaya were engaged, she was greatly exaggerating the certainty of the matter. In truth, the Yepanchin sisters merely hinted at the possibility of an engagement. In the Yepanchin household there is no clarity regarding Aglaya's feelings, although everyone believes she is in love with the prince and will be engaged to him soon. Lizaveta Prokofyevna, Madame Yepanchin, is against the marriage with the "sickly idiot," but she does not know really know why she feels this way.

One day, Myshkin calls on Aglaya, but after he beats her in a card game, she mocks him and he leaves. In tears, she sends the prince a hedgehog that she buys from Kolya. The prince understands the animal as a sign of peace and he is ecstatic with joy. That same evening he calls on Aglaya again. In front of the rest of her family, she asks Myshkin if he is asking her to marry him. He replies that he loves her very much and that he is indeed proposing. She then continues to ask about his fortune and career plans. Her sisters start laughing and she joins them. The prince is saddened because it appears to him that she is mocking him again. Aglaya runs out and cries. The family is convinced that she does in fact love the prince, but when they reenter the drawing room, she is in the midst of apologizing to Myshkin yet telling him there can be no hope of a marriage between them. For several days after, the same episode is replayed again and again: Aglaya quarrels with and insults the prince and then asks for his forgiveness.

Myshkin briefly encounters Hippolite, who has just left Ptitsyn's house. The prince tells the boy that the most virtuous way he can die is with forgiveness of others' happiness.

WE learn that Varya was correct in telling her brother about a dinner party at the Yepanchins, which is to feature Princess Belokonskaya and other high-society friends and benefactors of the family. The Yepanchins, including Aglaya, are worried about the impression Myshkin will make at the event. The prince feels this worry and it makes him very nervous.