Solanio and Salerio discuss the rumor that Antonio has lost yet a second ship. Shylock enters and complains that both Solanio and Salerio had something to do with his daughter's flight. They do not deny it, but instead ask Shylock if he has heard about Antonio's losses.

Shylock tells them that Antonio should "look to his bond" and make sure he repays the money, or else Shylock is planning on taking his pound of flesh. Shylock is furious with Antonio, whom he blames for the loss of Jessica, and also bears an older grudge against the man. He then delivers his famous soliloquy, "Hath not a Jew eyes? Hath not a Jew hands, organs, dimensions, senses, affections, passions...". The speech concludes with Shylock saying that he will be revenged for all the times he has been treated badly by Christians.

One of Antonio's servants arrives and bids Solanio and Salerio to go to Antonio's house. They leave, and Tubal, another Jew, arrives to speak with Shylock. Tubal has been in Genoa, where he tried to locate Jessica. He tells Shylock that Jessica had been in the city, and had spent over eighty ducats while there. She had also traded a turquoise ring for a monkey, a ring which Shylock regrets losing because he had received it from his wife Leah. However, Tubal also brings Shylock news that Antonio has lost yet a third ship, and is almost certain to go bankrupt in the near future. Shylock is excited by this news, since he has decided that he would rather exact revenge on Antonio than receive his three thousand ducats back.