King Pellinore arrives for the knighting ceremony with news from London: King Uther Pendragon has died. The Nurse exclaims tearfully that King Uther has neither heir nor next of kin. But, King Pellinore tells about how a sword in a stone has appeared in a churchyard. Pellinore, getting excited, says that the sword has written on it: "Whoso Pulleth Out This Sword of this Stone and Anvil, is Rightwise King Born of All England."
The appearance of the sword is another magical event in the novel. It also seems somewhat backward that a country's new ruler will be decided by something so arbitrary—yet this is indicative of the absence of authority that governs England, and the fact that England is ruled by force (i.e. "by the sword").
The sword, Pellinore continues, has not yet been pulled out although all the Lords of London have been trying. The Court has arranged a tournament for New Year's Day to find the next King of England. Kay quickly demands that they go to London and enter this tournament—it will be Kay's first as a Knight—and Sir Ector agrees.
A tournament in this era typically involved a variety of knightly sporting events such as jousting, sword-fighting, fist-fighting, and others.
At this moment, Wart comes in with Merlyn to hear they will be travelling to London and Wart will act as Kay's squire in the tournament. Wart, however, is sad: Merlyn has come to say goodbye.
Although this event will be the making of Arthur and a fated event, Wart barely registers it, saddened only by Merlyn's departure.