The banquet is lavish, and Prince John has invited influential Danes and Saxons as well as Normans in the hope of winning their support with an unusual show of courtesy. Cedric and Athelstane attend, although Rowena stays away.

John restrains his annoyance and manages for a while to be a good host. The Normans poke fun among themselves at the Saxon's sensible but unfashionable clothes, their unrefined manners, and their reputation for gluttony and drunkenness, but John is following the advice of his killjoy counselor Fitzurse in trying to please the Saxons.

John raises a toast to Wilfrid, but Cedric declares that he will not drink to honor his disobedient son, whom he has disowned for his attachment to Richard. Amused at the rift between father and son and the ironic cause of it, John responds that Cedric won't mind then that the fiefdom of Ivanhoe, which Richard gave to Wilfrid, is given by John to Front-de-Boeuf.

After the initial insult, a flurry of anti-Saxon witticisms from John's followers enrage Cedric, and Fitzurse tries to defuse the situation with a reminder to John. The prince, remembering that he is supposed to be courting the Saxons' favor, dismisses the rude remarks as harmless teasing not intended to offend and replaces his toast to Wilfrid with a toast to Cedric.

Following up with a toast to Athelstane, who is enjoying the abundance of food and doesn't mind an opportunity to quaff another ale, John goads Cedric into raising a toast of his own to some Norman he finds worthy. Fitzurse whispers to Cedric that he should smooth things over by making the toast to John. Cedric raises his cup to Richard the Lion Heart.

John himself waffles between drinking the toast or refusing it. To decline to drink to the king would be impolitic, even for one who is conspiring to seize the throne for himself. The courtiers lift and lower their cups in confusion. The awkward moment passes, and Cedric departs with Athelstane and a number of other offended Saxons.

When Prior Aymer also excuses himself, noting that he must start for home that night, John realizes that the mood is unfavorable and his faction is in danger of breaking up. Fitzurse assures him that he and De Bracy will rally the departing nobles. Out of John's hearing, Fitzurse vents to De Bracy his frustrations in counseling a cowardly and erratic prince who fumbles his part no matter what the occasion.