Book Two of Don Quixote, originally published as a separate volume, includes an unusual literary twist. Before Cervantes published his authentic Quixote sequel, a pirated Book Two written by an author named Avellaneda appeared in print. Outraged, Cervantes wrote the pirated book into his sequel. Thus in Cervantes' Book Two, Don Quixote and Sancho Panza overhear talk of Avellaneda's pirated version of their adventures while dining in an inn and set off to Barcelona, where they kidnap one of Avellaneda's main characters.
We soon meet a new character in Book Two, as well. Samson Carrasco is a young man from Don Quixote's village who has recently graduated from Salamanca University. He picks up where the priest and the barber left off in Book One, attempting to rescue and protect Don Quixote.
Determined to travel to Toboso to pay his respects to Dulcinea, Don Quixote rejects Carrasco's attempts to dissuade him, and knight and squire set off for Toboso. When they encounter three peasant girls, Sancho tries with some deception to pass off one of them as Dulcinea. Don Quixote, always certain that enchanters are working their mischief against him, is convinced that evil enchanters have made Dulcinea look like an ugly peasant girl.
Don Quixote unexpectedly wins a battle with The Knight of the Mirrors, who turns out to be none other than Samson Carrasco in disguise. Samson's plan to get the Don back home to safety by beating him in a duel (while disguised as a rival knight-errant) fails when Don Quixote wins the battle.
Don Quixote and Sancho Panza then meet The Knight in the Green Topcoat and play parts in the pastoral tale, "Camacho's Wedding." The adventure of Don Quixote's descent into the Cave of Montesinos follows, after which, in a trance, the Don describes the marvellous things he experienced in the Cave. Later, Sancho and Don Quixote attend Master Peter's puppet show. Our knight-errant gets carried away by the spectacle of the puppet Moorish knights doing battle with puppet Christians and attacks them with his sword.
Later, Don Quixote accepts an invitation to the unnamed Duke and Duchess's palace. The Duke and Duchess poke fun at Don Quixote by organising a series of burlesque pageants and arranging for Sancho to govern the Island of Barataria. Although the squire's talent for leadership surprises everyone, he renounces the life of a feudal governor and the elaborate prank played by the Duke and Duchess in a courageous act of loyalty to Don Quixote.
After his journey to Barcelona to kidnap the Avellaneda character, Don Quixote gets involved with a bandit named Roque Guinart. After this meeting, Don Quixote and Sancho arrive at Barcelona where they are the guests of Don Antonio Moreno, who also proposes to have fun at Don Quixote's expense.
In Barcelona, The Knight of the White Moon challenges Don Quixote to a battle in the presence of a distinguished company. Don Quixote is quickly defeated by the Knight, who turns out to be none other than Samson Carrasco. As a condition of his defeat, Don Quixote is forced to abandon knight-errantry for the rest of his life
The remaining chapters recount the journey of Don Quixote and Sancho Panza back to their village in La Mancha, including an additional stay with the unnamed Duke and Duchess and sundry other humiliating experiences.
When they arrive in the village, the now quite ill Don Quixote is put to bed. After sleeping a long while, he wakes and declares his name to be Alonso Quijano once more. Appearing to have regained his reason, he denounces chivalry and knighthood and dies among the lamentation of friends.