Brown walks into the jail alone and expresses his fervent wish that Macheath not be caught. Just then, the constables bring in Macheath and lock him in his cell. He glares silently at Brown, who begs Macheath to say something. Finally Brown breaks down in tears and exits. As soon as Brown goes, Macheath turns to the audience and comments on how he treated Brown. Macheath describes how he thought about shouting at Brown but decided instead that a cold stare would work better. Macheath adds that he learned the trick of glaring at someone from the Bible.

Constable Smith enters with handcuffs, and Macheath politely asks if he may request a more comfortable pair, taking out his checkbook. He writes Smith a check for fifty pounds in exchange for wearing no handcuffs at all. While writing, Macheath ruminates that if Brown finds out Macheath has been sleeping with Brown’s daughter Lucy, then he will really be in for it. Macheath then launches into the “The Secret of Gracious Living.” In the first verse, Macheath describes starving artists and intellectuals who live their lives of poverty in pursuit of an ideal. He explains that this life is not for him because it is not really living. The second verse describes the ambitious types who commit daring acts and brag about their exploits. But at night they climb into barren beds with their frigid wives and can only dream of everything before them. He concludes by noting that although these types of people have plenty, they are not happy.

The ballad concludes. Lucy enters, visibly pregnant. She launches into Macheath, who protests that a woman should not say such things to her man. She says she has heard about Polly. He insists that he never married Polly but just kissed her and then she told everyone they were married. He offers to make Lucy an honest woman by officially marrying her.

Just then, Polly enters. She rushes to Macheath, asking why he did not flee. When he does not respond, she becomes worried. Lucy calls her a slut, and over Macheath’s protestations, the two women begin tearing into each other. They sing the “Jealousy Duet,” in which each woman insults the other and brags about how Macheath only truly loves her.

When the song ends, Macheath tells Lucy to calm down. He then turns on Polly and asks why she keeps talking about them being married. Polly does not accept this sudden change in behavior and insists to Lucy that she is his wife. The confrontation between the two women escalates. Mrs. Peachum enters to fetch Polly away from the jail, smacks her daughter, and drags her away while she is still calling for Macheath.

With Polly gone, Macheath thanks Lucy for helping him out in a tight spot. He tells Lucy the only reason he was not mean to Polly was because he felt sorry for her. Macheath and Lucy exchange sweet nothings, and then he asks her to bring him his hat and cane. After she tosses the cane and hat into Macheath’s cell, she leaves. Constable Smithwalks into Macheath’s cell to demand that Macheath give up his cane. Armed with a chair and crowbar, Smith chases Macheath around the cell, but Macheath slides past him and escapes.