Fowler recalls the night when Pyle first met Phuong. Fowler and Phuong are having a drink at the Continental Hotel when Pyle comes over and asks them to come sit at his table. They join Pyle and the American economic attaché, Joe. Bill Granger arrives at the same time. He is an American correspondent who has just returned from a press conference in Hanoi. Joe asks Granger to confirm a rumor that the Viet Minh have broken into the town of Phat Diem and burned the cathedral there.

Granger wants to stop talking politics and announces that he is off to the House of Five Hundred Girls, a in the district of Cholon. At his invitation, Fowler, Phuong, and Pyle accompany him to Cholon, where they plan to dine at the nearby Chalet. The four split up into two trishaws (a type of pedicab). Pyle and Granger arrive first and head into the . When the others arrive, Fowler tells Phuong to get a table for three at the Chalet before entering the to find Pyle. Both Granger and Pyle are surrounded by women, and Pyle is evidently horrified by the experience. Fowler thinks to himself that Pyle might be a virgin, and fueled by a desire to protect him, Fowler drags Pyle from the club.

Fowler and Pyle join Phuong in the Chalet, where there is music and dancing. As Pyle apologizes to Phuong for the delay, Fowler remembers his courtship with her. He had first seen her at a dance at the Grand Monde, where she was a hostess, and he recalls watching her dance with an American man who held her too tight, seeming to mistake her for a . Phuong left him in the middle of the dance and rejoined her sister. Fowler admired how she handled herself in the situation. The courtship that followed was long, and it took another four months before they became intimate.

Pyle dances with Phuong, and Fowler thinks he holds her at too great a distance. Miss Hei, Phuong’s sister, joins Fowler and asks him about Pyle. When the dancing couple returns, Miss Hei and Pyle strike up a conversation. Miss Hei is attracted to Pyle’s formality and politeness. She asks Fowler to set up another meeting with Pyle, and when Fowler explains that it will have to wait until he returns from a trip north, she suggests that Pyle should come visit her and Phuong while Fowler is away.

After dinner, Phuong and Pyle dance again. As he watches, Fowler regrets having learned of the rumor about Phat Diem. He asks himself why he should go, risking death. He reflects on a longstanding belief in impermanence, and he thinks about how he has always seen death as the only absolute truth. At last, he thinks to himself that enemies are valuable because they can grant a man the “immeasurable benefit” of killing him, whereas friends

Pyle and Phuong return as a cabaret performance begins. The first act is obscene, but Pyle cannot understand the French, so he laughs along without comprehending. A later act, however, features a troupe of female impersonators, to which Pyle reacts with violent disgust. He tells Fowler that they should leave because the material is not suitable for Phuong.