Act 3, scene 1 opens with the craftsmen meeting in a clearing in the woods to rehearse the play that they will be performing for the duke. Bottom worries that the high-born ladies in the audience will be offended by some of the play's more violent incidents, like the scene when Pyramus kills himself. He decides that the best solution is to write a prologue that he can recite to the audience before the play starts, in which he will warn the audience that "we will do no harm with our swords." To make it absolutely clear that Pyramus will not be really killing himself, Bottom says that he should tell the audience that he (who will be playing Pyramus) isn't really Pyramus at all. This is of course an utterly absurd solution, as it destroys the illusion and suspension of belief upon which the play depends.

The next problems that the craftsmen discuss are how to "bring moonlight into a chamber" for the scene where Pyramus and Thisbe "meet by moonlight" and how best to represent the wall through which Pyramus and Thisbe communicate. Quince and Bottom come up with a solution, suggesting that they simply have actors play both the moon and the wall. At this point Puck enters the scene, promising mischief. The other characters remain unaware of his presence.

The problems of staging having been ingeniously solved, the craftsmen now set about rehearsing the play. The actors, however, make a mess of it: muddling their lines, speaking before they're supposed to, accidentally reading the cues, or speaking the wrong words altogether. Bottom then enters as Pyramus, but to everyone's surprise, his head has been replaced with the head of an ass, a trick by the mischievous Puck. Bottom has no idea that Puck has done this to him, and neither do the others. At the sight of Bottom's new head, the others become alarmed and flee the stage, shouting, "Pray, masters! Fly, masters! Help!" Puck, unseen by the others and still unsatisfied, says he will run after them, taking the shape of " a horse" or "a hound, / A hog, a headless bear, sometime a fire."

After the others have left the stage, Snout and Quince enter one at a time and remark to Bottom that he is "translated." Bottom is suspicious and suspects that the others are playing a trick on him. He decides to stay where he is and sing a song so that the others know he is not afraid. As he begins to sing, Titania (under the influence of Oberon's spell) awakens and thinks Bottom's voice to be that of an "angel." When he stops singing, she asks him to sing again. She tells him that her "ear is much enamored of [his] note" and her "eye enthrallèd to [his] shape." Titania tells Bottom that he must stay in the wood with her because she loves him. This strange affection is, of course, a result of the magic love potion that Oberon sprinkled on Titania's eyes earlier.

Titania promises Bottom that he will have "fairies to attend on [him]" and "jewels from the deep." She duly summons her fairies and tells them to feed Bottom "with apricocks and dewberries" and to "fan the moonbeams from his sleeping eyes" with wings plucked from butterflies. When the fairies appear, Bottom addresses each in turn. He says that he will use one, named Cobweb, as a bandage should he cut his finger, and another, named Mustardseed, to garnish his beef.

At the end of the scene, Titania instructs her fairies to take Bottom to her "bower" and to "Tie up" his tongue. She has obviously, despite her supposed love for him, become somewhat exasperated with his inconsequential, witless speech.