At eleven o’clock the next morning, Higgins and Pickering are in Higgins’s laboratory in Wimpole Street, a fashionable and expensive area in Westminster, close to the Royal Society of Medicine and the consulting rooms of many distinguished specialist doctors. Higgins has been giving Pickering a tour of the laboratory and demonstrating the equipment to him when his housekeeper, Mrs. Pearce, enters and announces that a young woman with a “dreadful” accent has come to see him.

Eliza Doolittle (or Liza–she is called both), the flower girl Higgins and Pickering met the night before, enters the laboratory, dressed in what were evidently the cleanest and most respectable clothes she could find, though they create a pathetic impression on the two gentlemen and the audience. Higgins had been hoping to have a new accent to study, so he is disappointed and irritated to see Eliza, as he made notes on her accent the night before. He dismisses her brusquely, but Eliza announces that she has come to take lessons and intends to pay for them. She recalls Higgins’s boast from the night before and states that she wants to learn to speak English correctly so that she can “be a lady in a flower shop stead of selling at the corner of Tottenham Court Road.”

Eliza offers Higgins a shilling an hour to teach her English, since a friend of hers pays eighteen pence an hour for French lessons and it cannot cost as much as that to learn one’s own language. Higgins points out to Pickering that if one considers the shilling as a proportion of Eliza’s income, this is actually a handsome offer, equivalent to sixty pounds from the millionaires he is accustomed to teaching. The mention of such a large sum of money leads Eliza to panic and she begins to cry.

Pickering, who, unlike Higgins, has treated Eliza with consideration and courtesy since her arrival, says that he is interested in the notion of teaching Eliza to speak English properly. He reminds Higgins of his boast and suggests that they should conduct an experiment to see whether they can really pass Eliza off as an upper-class lady at a social event, wagering Higgins the expenses of the experiment that he will not be able to do it. Higgins agrees to this, regarding it as an irresistible challenge. He continues to talk about Eliza as if she were not present, exhibiting a complete lack of regard for her feelings and announcing, “I shall make a duchess of this draggletailed guttersnipe.”

Higgins then instructs Mrs. Pearce to take Eliza away and wash her, burning her clothes and ordering new ones. Pickering, Mrs. Pearce, and Eliza all protest that, as Mrs. Pearce expresses, “you can't take a girl up like that as if you were picking up a pebble on the beach.” They ask what Eliza’s position is to be in the house and what is to happen to her when the experiment is finished. Higgins treats these objections scornfully, pointing out that Eliza has no future as things stand. She is not married, and nobody else wants her. Finally, he prevails, and Mrs. Pearce takes Eliza to the bathroom.

When the two of them are alone, Pickering asks Higgins if he is “a man of good character where women are concerned.” Higgins flippantly replies that he has never met such a man, but he assures Pickering that his interest in Eliza is purely professional. Mrs. Pearce returns briefly while Eliza is bathing and, much to Higgins’s chagrin, asks him to be careful about his language and personal habits while Eliza is staying with him. She notes in particular his propensity to curse and to neglect his personal cleanliness to the extent of wiping his fingers on his dressing gown. While Higgins is still fuming at this, Eliza’s father, Alfred Doolittle, enters.

Doolittle has adopted the attitude of a father concerned about his daughter’s honor. He tells Higgins that he wants Eliza back, and Higgins immediately replies that he should take her, suggesting that Doolittle has arranged the entire situation to extort money from him. He then threatens to call the police. This confuses Doolittle, who has indeed come for money but is flustered to find the topic broached so suddenly. He asks Higgins for five pounds, adopting a wheedling tone and complaining that he is generally prevented from receiving charity by “middle class morality,” which regards him as “one of the undeserving poor.” Higgins is so delighted by Doolittle’s rhetoric that he offers him ten pounds, but Doolittle says that he would rather have five, since ten pounds is a large sum of money which he “wouldn’t have the heart” to spend.

As Doolittle leaves the laboratory, he passes a beautiful young lady in a kimono, whom he fails to recognize as Eliza. Eliza has enjoyed a luxurious hot bath for the first time in her life and now says that she understands why the upper classes are so clean: washing is a pleasure for them. Doolittle leaves, and Eliza remarks that she does not want to see him again. She is already delighted with her new station in life, and she rushes out of the laboratory with an excited shriek when Mrs. Pearce tells her that her new clothes have arrived. The scene ends with Higgins and Pickering both realizing from this reaction just how much Eliza will have to learn if Higgins is to succeed in the experiment.