When they arrive in Portsmouth, Nicholas and Smike are nervous about being in a new place. The theater is rather gloomy by day. Nicholas is still going by the name of Mr. Johnson.
Mr. Crummles introduces Nicholas to his wife, who has an iron grip. They watch the Crummles’ daughter do a ballet. Mr. Crummles is proud of his talented daughter, who gets fan letters. She is only ten years old.
Nicholas is introduced to the dancer that had been playing opposite Miss Crummles. To her father, Mr. Folair raves about how talented the daughter is. Privately to Nicholas, he says she isn’t that talented, and it is lucky she is the manager’s daughter. He is resentful because he isn’t put on stage as often as she is, even though he has a fan base. He claims the Crummles are forcing their daughter on the audience, and the theater is losing money because of it.
Folair introduces Nicholas to the tragedy actor, Mr. Lenville, who gripes that he only gets to perform when Mr. Crummles decides not to do the part. An actress, Miss Snevellicci, introduces herself to Nicholas, attracted to him.
Mr. Crummles tells the group the rehearsal times. He also assigns Nicholas the job of creating parts in a new play. Nicholas is overwhelmed until Mr. Crummles tells him he merely wants him to translate a French play.
The Crummles invite Nicholas to their home for dinner. Mrs. Crummles reveals that she teaches the acting arts. They decide to have Nicholas study the part of Romeo.
There are not many places to stay in Portsmouth that are cheap and habitable. Nicholas regrets not staying at the theater as the hour gets late. However, he finally finds a small place.