Fagin erupts into a rage when the Dodger and Charley return without Oliver. Fagin tosses a pot of beer at Charley, but the pot hits Bill Sikes instead. Sikes is a rough, cruel man who makes his living by robbing houses. They resolve to find Oliver before he reveals their operation to the authorities, and persuade Nancy to go to the police station to find out what happened to him.
Nancy dresses in nice clothing, and at the police station she pretends to be Oliver’s distraught sister. She learns that the gentleman from whom the handkerchief was stolen took Oliver home with him to the neighborhood of Pentonville, because the boy had fallen ill during the trial. Fagin sends Charley, Jack, and Nancy to Pentonville to find Oliver. Fagin decides to relocate his operation for the night and fills his pockets with the watches and jewelry from the hidden box after Charley, Nancy, and Jack leave.
When Oliver next enters the housekeeper’s room, he notices that the portrait of the lady whom he resembles is gone. Mrs. Bedwin says that Brownlow removed it because it seemed to worry Oliver. One day, Brownlow sends for Oliver to meet him in his study. Assuming that Brownlow means to send him away, Oliver begs to remain as a servant. Brownlow assures Oliver that he wishes to be Oliver’s friend. He asks Oliver to tell him his history. Before Oliver can begin, Brownlow’s friend, Mr. Grimwig, arrives to visit.
Grimwig, a crotchety old man, hints that Oliver might be a boy of bad habits. Brownlow bears his friend’s eccentricity with good humor. Mrs. Bedwin brings in a parcel of books delivered by the bookstall keeper’s boy. Brownlow wishes to send his payment and some returns back with the boy, but he has already gone. Grimwig suggests that Brownlow send Oliver but hints that Oliver might steal the payment and the books. Wishing to prove Grimwig wrong, Brownlow sends Oliver on the errand. It grows dark and Oliver does not return.
Oliver takes a wrong turn on the way to the bookstall. Suddenly, Nancy appears. She tells everyone on the street that Oliver is her runaway brother who joined a band of thieves, and that she is taking him back home to their parents. Everyone ignores Oliver’s protests. Bill Sikes runs out of a beer shop, and he and Nancy drag Oliver through the dark backstreets.
Nancy, Sikes, and Oliver arrive at a dilapidated house in a squalid neighborhood. Fagin, the Dodger, and Charley laugh hysterically at the fancy clothing Oliver is wearing. Oliver calls for help and flees, but Sikes threatens to set his vicious dog, Bull’s-eye, on him. Nancy leaps to Oliver’s defense, saying that they have ruined all his good prospects. She has worked for Fagin since she was a small child, and she knows that a life of disrepute lies in wait for Oliver. Fagin tries to beat Oliver for his escape attempt, and Nancy flies at Fagin in a rage. Sikes catches Nancy by the wrists, and she faints. They strip Oliver of his clothing, Brownlow’s money, and the books. Fagin returns Oliver’s old clothing to him and sends him to bed. Oliver had given the clothing to Mrs. Bedwin, who sold it to a Jew, and the Jew then delivered the clothing to Fagin and told Fagin where Oliver was.