On a street in London, Edward Prince of Wales, Richard, Buckingham, and Cardinal Bouchier (the Archbishop of Canterbury) enter and Richard welcomes the prince to London. Edward wishes that more of his uncles were there to meet him, and dismisses Richard's claim that his other uncles are dangerous. The Lord Mayor of London enters and welcomes Edward. Hastings enters and reports that Queen Elizabeth and the Duke of York have taken sanctuary and thus can't come to meet the prince. Buckingham orders the Cardinal to go retrieve the Duke of York, insisting that the boy didn't request sanctuary, his mother did, and that the prohibition against extracting someone from sanctuary thus doesn't really apply to him. He tells the Cardinal to forcibly seize the boy from his mother if necessary, despite the Cardinal's protestations to respect the sacred right to sanctuary. Hastings accompanies the Cardinal and they exit.
Prince Edward does not know that Richard has imprisoned his uncles, but knows that Richard isn't telling the truth when he calls them dangerous. Buckingham twists words to manipulate Cardinal Bouchier into extracting the Duke of York from sanctuary. Sanctuary was considered sacred and its protection is supposed to be respected by everyone (especially members of the Church!) Yet Buckingham's argument pretends to find a loophole in that protection by claiming the protection is only sacred for those who have explicitly asked for it (the Duke of York was brought into sanctuary by his mother and so he didn't ask for it himself – still, he should be protected by it).
Richard suggests that Edward Prince of Wales reside in the Tower (presumably so that Richard can more easily lock his nephew up and snatch the prince's power for himself). Edward is unenthused about Richard's offer, but reflects on his admiration for Julius Caesar, who reportedly built the Tower. In an aside, Richard alludes to young Edward's imminent death.
Richard's wish to put Edward up in the Tower and his threatening aside imply that Richard plans to murder the young prince shortly. Edward may prove to have more in common with Julius Caesar than he realizes: Caesar was murdered by men who pretended to be his friend.
The young Duke of York enters with Hastings and the Cardinal. The young Duke taunts Richard, beating him at his own game by trying to get Richard to call the fast-growing Edward Prince of Wales an "idle weed" (as Richard once scared the young Duke by saying that anyone who grew fast was just a weed). Richard stiffly refuses to insult the prince. The young Duke then tries to get Richard to give him his dagger for a present, but Richard won't. The young Duke advises the Prince not to sleep in the Tower because it's haunted by Clarence's "angry ghost." Edward Prince of Wales asserts, "I fear no uncles dead." "Nor none that live, I hope," adds Richard. The Prince says he hopes not and exits to the Tower with the Duke, Hastings, the Cardinal and attendants.
The Duke of York's eloquence and wit make Richard uncomfortable as the boy twists Richard's words back against him. Edward Prince of Wales attempts to empower himself, asserting strength and courage by claiming he's not afraid to stay in the Tower. Yet his show of strength backfires: by agreeing to stay in the Tower, Edward is walking right into Richard's power-hungry hands and is thus empowering his uncle, not himself.
Alone, Richard, Buckingham, and Catesby confer about their secret plan to make Richard King of England. They discuss whether Hastings and Stanley can be involved and, though Catesby doubts Hastings will support them (his love for the deceased King Edward makes him love Edward Prince of Wales), Buckingham tells Catesby to go anyway and feel Hastings out on the matter the following day. Buckingham says they'll hold "divided councils" tomorrow (two councils instead of one) – the first one will discuss the Prince's coronation and the second will presumably discuss how to crown Richard instead. Richard further tells Catesby to inform Hastings that Queen Elizabeth's captive relatives (Hastings' enemies) will be killed the next day at Pomfret Castle. Catesby exits. Richard tells Buckingham that, if Hastings refuses to support their plot, they'll just "chop off his head." He also promises to reward Buckingham's loyalty with the earldom of Hereford and other valuable goods. The two exit.
Richard's plot grows more intricate and more brutal. He plans to consolidate his own power by diffusing the power of Edward Prince of Wales – by breaking what should be one council on the coronation into two separate councils, Richard gives himself and his supporters an opportunity to undercut Edward's supporters. His directions regarding Hastings instruct Catesby to test out Hastings' allegiances in conversation and to try and lure him over to Richard's side by informing Hastings that Richard is getting rid of Hastings' enemies (and therefore, Richard suggests, deserves Hastings' support). The blasé tone Richard uses to describe executing Hastings' shows how heartless and unafraid of bloodshed he is.