The play Arsenic and Old Lace takes place on a September day in "present time," which, when it was written, was 1939. The play opens in the afternoon. Act II of the play takes place "later that night."
In Act I during the afternoon, Mortimer discovers a dead body in the window seat in the house of his two aunts. He thinks at first that his brother, Teddy (who thinks he is President Theodore Roosevelt), is the one who killed the man. He soon discovers that his two elderly aunts killed the man. They have been murdering men for awhile. Teddy thinks that he is digging the Panama Canal in the cellar. That is where the aunts secretly bury the bodies.
Near the end of Act I, Mortimer's brother, Jonathan, arrives with his doctor. The two aunts are uneasy about Jonathan's presence. He has had facial surgery and they do not recognize him. Jonathan's presence in the house is sinister.
Act II takes place near the middle of the play. When it begins, all of the main characters have been introduced. It is already clear that the two aunts are murderers. All of Act II takes place in the same evening over a relatively short period of time.
When Act II begins, Jonathan and his doctor are telling the story of what the last several years for them have been like. They are sitting in the living room in the early evening of the same day the play began. Abby hints that Jonathan should leave for the night, but he makes it clear that he wants to stay in the house. Soon it is revealed that Jonathan and his doctor are looking to bury a body of their own. They decide to bury it in the basement "Panama Canal."