On Sunday, Lennie sits in the barn stroking his puppy, which is dead. He fears this means he won't be allowed to tend the rabbits. He throws the puppy away, then retrieves it and starts stroking it again.
The dead puppy is an ominous sign. Once again, Lennie's innocent strength has created accidental tragedy.
Curley's wife enters. Lennie tells her he's not allowed to talk to her, but she says no one will ever know. She notices the dead puppy and consoles him, then explains that she almost became a movie actress, but her plans were thwarted by her mother and a bad talent agent. She says she doesn't even like Curley.
Like the men on the ranch, Curley's wife also suffers from lack of love and attention, and also from having sacrificed her plans and dreams for Curley.
Lennie starts talking about the farm and rabbits, and explains that he likes to pet soft things. She says her hair is soft. He strokes it excitedly, messing it up. Curley's wife gets upset and tells him to let go. Lennie panics and shakes her head, breaking her neck.
A moment of connection between Lennie and Curley's wife ends in tragedy. Just as he killed his puppy, Lennie kills her, and his dream.
Aware that he's done "another bad thing," Lennie sneaks out of the bunkhouse.
Lennie is referring to the events in Weed.
Candy enters and finds Curley's wife's body. He runs and gets George, and the two of them realize that Curley will lynch Lennie. Candy then asks if the plan to buy the farm is now officially off. George says he never really thought it would happen, but Lennie believed in it so much he had started to as well.
Lennie stopped George from growing "mean" because his belief in their dream made George believe it too. Now George is doomed to live a lonely rancher's life.
Fearing Curley will think he had something to do with the murder, George tells Candy to pretend George never saw the body. George leaves. Candy curses at Curley's wife's body. He cries, then goes to alert the men.
Candy cries for the death of the dream that had saved him, for a while, from hopelessness. George, meanwhile, protects himself.
Slim, Whit, Carlson, Curley, Crooks, and George enter the barn. Curley demands that Lennie be killed. Carlson says his gun is missing and guesses Lennie stole it. Slim tells George that Lennie has to be killed. George, who knows where Lennie is hiding, sends the lynch mob in the wrong direction.
Curley's first emotional response to his wife's death is not sorrow, but anger. Note the parallel: earlier it was Carlson's gun that killed Candy's dog, and Slim who agreed the dog had to die.