Othello puts Cassio in charge during the celebration. He instructs Cassio to make sure that the men on guard practice moderation and self-restraint despite the party. Cassio says that Iago knows what to do, but that he will make sure to see to it himself. Othello and Desdemona leave to consummate their marriage.
Both Othello and Cassio wildly misjudge Iago, revealing just how duplicitous Iago is. Also notice that Othello and Desdemona did not have sex until they were married, in contrast to the graphic imaginations that the other characters have indulged in.
When Othello and Desdemona are gone, Iago praises Desdemona's beauty while also slyly suggesting that she might be a seductress. Cassio agrees that Desdemona is beautiful, but believes her to be modest.
Iago tries to convince Cassio to actually take a shot at seducing Desdemona by alluding to the idea that demure women are probably just hiding their inner whore. Cassio, like Othello, takes people at face value.
Iago then turns the conversation to the revels, and tries to convince Cassio to take a drink. Cassio declines, saying he has no tolerance for alcohol. Eventually, Iago convinces Cassio to let in the revelers who are at the door. Cassio exits to do just that.
Unable to manipulate Cassio only with words, Iago progresses toward more directly bodily means: alcohol. Cassio, however, knows himself and refrains.
Alone, Iago addresses the audience: the revelers are Roderigo and three men of Cyrpus, who are all touchy about their honor and whom he has made sure to get drunk. Once he has also gotten Cassio drunk, he will create some event that results in Cassio offending the people of Cyprus.
Updating the audience about his secret plans, Iago continues to act as a "director." Earlier he used people's prejudices to manipulate them to do what he wants. Now he uses honor.
Cassio returns with Montano and other revelers. Cassio, in good spirits, says that they have already forced him to take a drink. The revelers drink and sing. Eventually, Cassio, who is drunk but loudly protesting that he is in fact not drunk, exits offstage .
Cassio, insisting that he is not drunk when he clearly is, seeks to maintain his honor or dignity via an illusion about himself. At the same time, at a trivial level, he also starts to speak untruths as a result of Iago's manipulations.
While Cassio is gone, Iago speaks with Montano, telling him that Cassio is a great soldier, but that he has a terrible drinking problem and may not be able to handle the responsibilities Othello has given him. Montano says that they should report this to Othello, but Iago says that he cares too much for Cassio to do that. Meanwhile, Iago secretly sends Roderigo off to pick a fight with Cassio.
Iago continues to orchestrate complicated sets of doubling-crossings in order to promote the illusions that will help him with his plan. He is a master at making someone look bad while seemingly trying to defend that person.
Seconds later Cassio chases Roderigo onstage, cursing at him. They are about to fight when Montano tries to intervene, noting that Cassio is drunk. Cassio is offended, and he and Montano fight. During the fighting, Iago sends Roderigo to raise an alarm. Cassio injures Montano.
All of the characters in this scene, misled about each other by Iago, now do exactly what Iago wants them to do. Just as Iago hoped, Cassio's honor is offended when his drunkenness is noticed, and he reacts by fighting.
Othello enters with his attendants. He immediately puts an end to the fighting, and demands to know how the fighting began. Iago and Cassio say they do not know, while Montano says that he is too injured to speak, but he adds that Iago does know the full story.
Othello keeps up his strong, quiet dignity in contrast to Iago's flurry of manipulations. By saying he doesn't know what happened, Iago makes it look like he is trying to protect Cassio..
Iago speaks, saying that it pains him to cause any harm to Cassio but that he must tell the truth as Othello commands. He explains that as he and Montano were talking, Cassio chased in some unknown fellow (Iago does not identify him as Roderigo) with sword drawn. He says that Montano then stepped in to stop Cassio, while Iago went after the unknown man but could not catch him. When Iago returned, Cassio and Montano were fighting. Iago then adds that the first unknown man must have offended Cassio in some way to make him behave as he did.
As usual, Iago pretends that he does not want to say what he is about to say, which makes what he is saying seem even more authentic. Because the audience knows that he's lying, though, his tactics are clear to us, but not to the any of the other characters. In this way, Iago makes the audience complicit in his lies, and audience almost comes to root for his success.
When Iago finishes his story, Othello says that he can tell that, out of love for Cassio, Iago tried to tell the story in a way that made Cassio look as good as possible. He says that he loves Cassio as well, but that he must dismiss Cassio as an officer. Desdemona arrives, awakened by the noise. Othello leads her back to bed, and also promises to tend to Montano's wounds. Everyone exits but Iago and Cassio.
Othello is just as decisive as he was in earlier scenes, but now he, too, has been tricked by Iago and his actions only further Iago's plot. Even so, Desdemona's arrival and then exit with Othello shows her continued obedience to Othello, and, more importantly, his confidence in that obedience.
Cassio despairs at his lost reputation: "O, I have lost my reputation! I have lost the immortal part of myself, and what remains is bestial" (2.3.251-3). Iago asks if Cassio knew who he was chasing after, but Cassio says that he can't remember anything distinctly. He adds that he plans to ask Othello to return him to his position. Iago, however, counsels him to approach Desdemona for help. Desdemona is so kind and generous, and Othello so in love with her, that she is sure to help Cassio if he asks for it and just as sure to convince Othello to return Cassio to his former position. Cassio thanks Iago for his counsel, and exits.
Cassio sees his reputation, his honor, as what makes him human. Without it, he sees himself as a beast, using the kind of animal imagery that other racist characters had used only to describe Othello. Meanwhile, Iago moves his plot into its second phase: to twist two noble traits—Cassio's desire to regain his honor and Desdemona's generosity—to provoke Othello's doubt of Desdemona and sexual jealousy of Cassio.
Iago delivers another soliloquy, in which he says that his advice to Cassio is actually good advice, and that enlisting Desdemona's help is the best way for Cassio to regain his position. But he adds that when devils want to do evil they make it seem as if they're trying to do good. Iago says that as Desdemona tries to help Cassio, Iago will convince Othello that she does so not out of goodness but lust for Cassio. "Out of her own goodness [I'll] make the net that / Shall enmesh them all" (2.3.335–336).
Iago again takes on the role of "director," laying out his plans for the audience. In the soliloquy he makes the difference between appearance and reality still more obscure. He suggests that even really good actions can produce bad effects. He promises to turn Desdemona's generosity against her, and use it to provoke Othello's jealousy and ruin everyone.
Roderigo enters. He is angry that he has gotten himself beaten by Cassio and given Iago almost all his money, but does not have Desdemona. Iago tells him to be patient, notes that Cassio has already been removed as an obstacle, and says that these sorts of plans take wits and time to develop.
Encouraging patience, Iago subtly reinforces the parallel between his plots and drama in general: both need time to come to their climaxes.
Roderigo exits. Iago addresses the audience, outlining his plan: he will get his wife to set up a private meeting between Cassio and Desdemona, then make sure that Othello observes this meeting.
Iago describes how he will stage yet another scene and control how the other characters will interpret it, much as a playwright does with every scene he or she writes.