The pictures have been removed from the throne room and Frida and Di Nolli have replaced them, with Frida pretending to be the Marchioness and Di Nolli pretending to be Henry IV. Henry IV enters the room, preparing to go to bed. Frida calls out, "Henry!", causing him to become terror-stricken and think that he is really mad. However, Frida's courage soon gives out and she screams that she is frightened, causing the others to run in and help her.
They have been told by the counselors that Henry has been cured. Henry is furious about the deception and the fact that the Doctor's plot nearly drove him mad again. In order to get some revenge on them, he chooses to pretend that Di Nolli and Frida are in fact the characters they are dressed up to be. Belcredi intimates that Henry is again faking it, and finally Henry asks him what he should do now that he is cured. He tries to make Belcredi understand that there is nothing for him to do in the real world since he has lost twenty years of his life by living in the castle.
Henry tells them that after falling from his horse he was really mad for about twelve years. When he woke up, he realized that he knew nothing of the outer world, and that he had lost his love, had his friends deceive him, and been replaced. He accuses some of his former friends of having pricked his horse, thereby causing it to rear and cause his fall. Henry IV then turns to the Doctor and says that he must be a completely new case for the Doctor to study: a man who chooses to remain mad.
Henry tells them a story about an Irish priest who fell asleep in the sun one day on a park bench. He was dreaming, and when a young boy walked by and brushed his cheek with a flower, the priest woke up, but still looked happy and forgetful of everything around him. Suddenly he straightened up and the look of seriousness returned to his face. Henry then compares his acting the part of Henry IV for all these years with the Irish priest acting his part. He concludes that it is really the other people, such as Belcredi and Donna Matilda, who are mad because they wear a mask everyday but do not realize it.
Henry claims that he is not a madman as they understand madmen, since he can recognize the different realities in which he plays a role. He points to Donna Matilda and tells her that she has lived a different reality from his, and is no longer recognizable in his reality, that of Henry IV. Turning to Frida, Henry informs her that she is part of his reality, that she is his. He takes hold of her and hugs her, laughing like a madman. When the others start to approach him to free Frida, he order the valets to restrain them. Belcredi breaks free of them and lunges towards Henry, who has drawn his sword. Henry stabs Belcredi, mortally wounding him, and the others carry him offstage. After a sharp cry from Donna Matilda, meant to signify Belcredi's death, Henry gathers the valets around him and tells them, "here we are...together...for ever!"
The Doctor's climax and ruse turns out to be unnecessary. However, the ruse does have the effect of almost driving Henry mad again. Immediately thereafter Henry talks about the past. This is his way of making an effort to contain time. His fight at the end is fundamentally an effort to avoid a reality where time is flowing. Seeing Frida is in a sense a miracle because she is "resurrected" for him out of his past. Henry's preference for absolute time makes him seize her at the end; he is essentially seizing frozen time.
When Henry IV kills Belcredi, there is a subtle shift in his behavior. He uses the valets for protection, thereby isolating himself in his masquerade of madness. If is now apparent that the murder of Belcredi will force him to be forever caught in his masquerade of madness.
The story of the Irish priest is important in its relation to the concept of masks on face. Henry is trying to explain that the priest had removed his mask for a second, dreamily staring out into space and smiling. However, once he caught himself he immediately put his mask back on. Henry's point is that he is similar to a priest in that he has chosen his mask and wears it diligently. The difference lies in the fact that Henry is completely aware of his mask, whereas the priest was not.
The Doctor's ruse again invokes the concept of variable truths. He creates a double image, a young Henry IV and Marchioness and an old Henry IV and Marchioness. Although unaware of it, the Doctor has really done nothing more than create two false realities. Henry elucidates this when he acknowledges that he immediately knew Di Nolli was not Henry IV, because he himself is Henry IV. However, since both he and Donna Matilda have changed due to time, even they are no longer the real representations of the portraits. This again challenges our sense of reality as created in a world where time is flowing. In many ways, Pirandello is saying that a stage reality is more real than the "real" world.