Unaware of the Oracle's revelations, Antigonus has arrived on the desolate Bohemian coast, bearing the infant princess. He tells the audience how Hermione appeared to him in a dream, telling him to name the babe Perdita, and declaring that he would never see his home, or his wife Paulina, again. He lays the infant down in the woods, and places gold and jewels beside her, and a note telling the child's name, and then makes ready to depart. A storm has come up, however, and a bear appears and chases him off stage. After a time, a Shepherd comes in and finds the baby; he is joined by his son, a Clown, who reports seeing a man (Antigonus) killed by a bear, and a ship (Antigonus's vessel) go down in the storm. The two men then discover the wealth left with Perdita, and they rejoice in their good fortune and vow to raise the child themselves.
On the empty stage, an actor appears, playing Time, and announces that in the space between acts, sixteen years have passed. The scene shifts to Polixenes's castle in Bohemia, where the king is conversing with Camillo. Camillo asks leave of Polixenes to return to his native Sicily, since sixteen years away have made him homesick—and besides, the still-grieving Leontes would welcome him home with open arms. Polixenes replies that he cannot manage the kingdom without Camillo's assistance, and the two men discuss the king's son, Florizel, who has been spending a great deal of time away from court, at the house of a wealthy shepherd—a shepherd whose daughter is reputed to be a great beauty. Somewhat worried, Polixenes decides that they will visit this shepherd's house, but in disguise, and see what Florizel is up to.
Meanwhile, in the Bohemian countryside, a jovial vagabond, peddler, and thief named Autolycus is wandering along a highway and singing loudly. He comes upon the Clown on his way to market, counting a substantial sum of money with which he plans to buy supplies for a country sheepshearing (a great event in the area). Autolycus accosts him and pretends to be the victim of a robbery. As the Clown commiserates with him, the crafty thief picks his pocket, and when his victim has gone on his way, Autolycus resolves to make an appearance at the sheepshearing—in a different disguise, of course.
The end of Act III, even before the entrance of Time in Act IV, marks the play's shift in mood. The scene on the sea-coast of Bohemia (there is, of course, no coastline—Bohemia was an inland German principality) begins darkly, with the abandonment of Perdita, followed by Antigonus's death at the hands of Shakespeare's finest stage-direction: Exit, pursued by a bear. But the sudden appearance of the Shepherd and his son, with their comic dialogue (there has been no comedy in the play up until this point) and their discovery of the baby provides the first hint that this may not be a tragedy after all—indeed, it may be instead a classic fairy tale, complete with a lost princess raised in ignorance of her heritage.
A number of critics have criticized the appearance of Time, personified, and pointed out that having sixteen years pass between Acts gives the play a disjointed feeling. These complaints are valid, as far as they go, but the disjunction between Acts I-III and Acts IV-V is built into the narrative, and has as much to do with theme, mood, and setting as it does with the sixteen-year gulf. Indeed, after the brief scene with Camillo and Polixenes, which serves to set the stage for the Act's events, we are plunged immediately into a world that is completely different from the winter-time Sicilia of the earlier action. Bohemia was an oppressive winter wilderness when Antigonus landed there, but with the entrance of Autolycus it has become a different place. As his song puts it, "When daffodils begin to peer, / When heigh! The doxy over the dale, / Why, then comes in the sweet o'the year, / For the red blood reigns in the winter's pale." (IV.iii.1-4) Winter has given way to "the sweet o'the year," a time of flowers and fairy tales rather than jealousy and death.
Autolycus is one of Shakespeare's more endearing rogues. His name is taken from Greek myth: in Homer, he was the finest mortal thief, while Ovid made him the son of Hermes, the trickster god and patron of thieves. He robs and cheats with abandon, but no one seems really hurt by him—certainly the Clown recovers well from being fleeced, well enough to accept Autolycus as a servant later in the play. His songs add a cheery musical backdrop to Act IV, which is one of the most song-filled portions of any of Shakespeare plays, and his cheerful attitude toward sex ("When heigh! The doxy over the dale") contrasts with Leontes's morbid obsession with infidelity. And his small-scale villainy serves a purpose, if only to prevent the bucolic paradise around the Shepherd's farm from seeming too perfectly idyllic. The romantic comedy of Florizel and Perdita needs him—his cheerful misbehavior provides an entertaining counterpoint to their earnest devotion.