The Franks, the Van Daans, and Mr. Dussel are forced into hiding due to the Nazi occupation of Holland. Anne records in her diary how the Nazis began eroding Jewish rights. Mr. Frank lost his business, and Jews were prohibited from attending schools with non-Jews, going to the cinema, or using streetcars. After going into hiding, the Franks and Van Daans learn from Mr. Dussel that the Nazis have deported all Jews in Amsterdam to concentration camps. Their greatest hope for freedom lies with the Allied invasion of the continent, led by the Americans.

The harsh reality of living under such oppressive conditions is evident every day. The atmosphere in the cramped and crowded attic becomes increasingly tense. They cannot go outside or enjoy fresh air. Anne cannot run, shout, or jump. Giving in to these natural urges only lands her in trouble, such as when she spills milk on Mrs. Van Daan’s coat while dancing around the room. Anne’s growing friendship with Peter is also hindered by their unnatural situation. When she wants to spend time alone with Peter, she can only do so under the watchful eyes of six people, observing her as she crosses the room to Peter’s door. The strain of these living conditions affects everyone. In act 2, scene 4, when tensions peak with Mrs. Frank's insistence that Mr. Van Daan leave the attic, Mr. Frank remarks, ‘‘We don’t need the Nazis to destroy us. We’re doing it ourselves.’’