Lancelot, referred to as a clown, is the servant to Shylock. He tells the audience that he is thinking about running away from his master, whom he describes as a devil. However, he cannot make up his mind about whether to run away or not because his conscience makes him guilty when he thinks about leaving Shylock.

Lancelot's father, and old man named Gobbo, arrives with a basket. He is nearly completely blind and cannot see Lancelot clearly. Gobbo asks his son which way leads to the Jew's house, meaning Shylock's house. He mentions that he is searching for his son Lancelot. Lancelot decides to have some fun with his father, and so he pretends to know a "Master Lancelot" (a term for a gentleman's son, not a servant). He informs Gobbo that "Master Lancelot" is deceased.

Gobbo is clearly upset by this, and Lancelot kneels down in front of him and asks his father for his blessing. Gobbo at first does not believe that Lancelot is really his son, but then he feels his head and recognizes him.

Lancelot tells his father that he is wasting away serving Shylock and that he will turn into a Jew himself if he stays there much longer. Gobbo has brought a present for Shylock, but Lancelot instead convinces his father to give it to Bassanio, whom Lancelot hopes to have as his new master. Bassanio, coming onto stage at that moment, accepts the gift of doves and tells Lancelot that he may leave Shylock and join his service. He then orders one of the men to get Lancelot a new uniform to wear, and sends Lancelot away.

Graziano arrives and tells Bassanio that he wants to join him on the trip to Belmont, where Bassanio plans to go and woo Portia. Bassanio feels that Graziano is too loud and rude and asks him if he will be able to act more appropriately. Graziano says that he can, and that he will "put on a sober habit" (2.2.171). Bassanio then agrees to take him to Belmont.