This chapter begins with Nick's description of Gatsby's Saturday night parties: they have become legendary in New York for their opulence and hedonism. These parties are obscenely lavish. The guests marvel at Gatsby's Rolls-Royce, his enormous swimming pool, the live musicians he engages weekly, the sumptuous food that he provides for hundreds of people, and, perhaps most importantly, the unlimited liquor he generously supplies. Nick is eventually invited to one of these parties, but not by Gatsby himself; instead, Gatsby's chauffeur brings an invitation to Nick's door.
Gatsby's mansion is packed with revelers when Nick arrives. Very few of them seem to be invited guests, and even fewer have met Gatsby face to face. It is a very mixed crowd: East Eggers rub elbows with West Eggers, and people from New York high society meet those from "the wrong side of the tracks." Nick runs into Jordan Baker, who is even more casually bitter than usual because she has recently lost a golf tournament. All around them, people gossip about their mysterious host. They speculate that he once killed a man in cold blood or that he was a spy for Germany during World War I.
Jordan and Nick go looking for Gatsby in his mansion; instead, they find a grotesque little man in enormous eyeglasses (Nick calls him "Owl Eyes") skimming through the books in Gatsby's library. Both Owl Eyes and Jordan initially think that the books are false, designed only to give the appearance of a library; both are surprised to find that the books are real.
Outside, in the garden, Nick strikes up a conversation with a handsome, youthful man who looks familiar to him; it turns out that they served in the same division during the war. This man is the mysterious Gatsby. Gatsby has an affected English accent and a highly formal way of speaking. He stands aloof from his guests, watching the party rather than taking part in it. Gatsby leaves to take a phone call; later, he sends his butler to ask Jordan Baker if he may speak with her privately. When she finishes talking to Gatsby, she tells Nick that she has heard some "remarkable" news.
At about two in the morning, Nick decides to walk home; on the way, he sees Owl Eyes, who has crashed his car into a ditch. Owl Eyes loudly proclaims that he is finished with the whole business; it is not clear (either to Nick or to the reader) what, if anything, he means by this.
Nick informs the reader that he did not merely attend parties during the summer of 1922; he was also working in New York, a city which he simultaneously loves and hates. At Tom and Daisy's urging, he becomes romantically involved with Jordan Baker. Though he finds her essential dishonesty somewhat off-putting, he is attracted to her despite himself.
In this chapter, Jay Gatsby remains fundamentally a mystery. Few of the partygoers have met their host, and Gatsby stands aloof from his own celebration. He does not drink, he does not dance, he remains an observer. The man himself stands in stark contrast to the sinister gossip Nick has heard about him. Gatsby is young and handsome, with a beautiful smile that seems to radiate hope and optimism. Nick falls instantly in love with Gatsby's smile, remarking that it has "a quality of eternal reassurance in it." Gatsby's innate hopefulness is contagious.
Though Nick implies throughout the novel that wealth and ostentation tend to mask immorality and decay, Gatsby's wealth seems to serve another purpose, one that is not yet clear. The reader already knows that not everything about Gatsby is mere display: his books are real, for example, and his smile is real. However, he has a queer false English accent that is obviously false. Gatsby, at this point in the novel, remains an enigma, a creature of contradictions.
Fitzgerald gives great attention to the details of contemporary society: Gatsby's party is both a description and parody of Jazz Age decadence. It exemplifies the spirit of conspicuous consumption, and is a queer mix of the lewd and the respectable. Though catered to by butlers and serenaded by professionally trained singers, the guests are drunk, crude, and boisterous. The orchestra plays a work by Tostoff called The Jazz History of the World; though it had had a fantastic reception at Carnegie Hall, the piece is the antithesis of classical respectability.
At the time of The Great Gatsby's publication, cars were still novelty items; in the novel, they are imbued with a sense of luxurious danger. A car accident disturbs the end of the party, when a drunken man crashes his car into a ditch. Nick admonishes Jordan for being an unspeakably awful driver, and her near-accident serves as a metaphor for the behavior of her contemporaries. Jordan is a careless driver because she considers caution the responsibility of others; she feels that the onus is on them to keep out of her way.
The chapter also reinforces Nick's position an objective and reliable narrator: it ends with his claim that he is one of the few honest people he has ever known. Jordan Baker, by contrast, is compulsively dishonest; the fact that she cheated to win her first golf tournament is entirely unsurprising. She assumes that everyone else is as dishonest as she: she automatically concludes that Gatsby's books, like the better part of her own personality, exist merely for the sake of appearance.