At a Sunday morning party at Gatsby's, Nick hears further gossip about Gatsby from a group of foolish young women. They say that he is a bootlegger who killed a man who discovered that he was nephew to von Hindenburg and second cousin to the devil. One morning, Gatsby invites Nick to lunch in the city. He proudly displays his Rolls-Royce, then abruptly asks Nick what he thinks of him. Nick is understandably evasive. Gatsby responds to his reticence by giving Nick an account of his past. His story, however, is highly improbable. Though he claims to descend from a prominent Midwestern family, when Nick asks him which Midwestern city he comes from, Gatsby hesitates, then says "San Francisco." He rattles off an absurdly long list of accomplishments: he claims to have studied at Oxford and lived in all of the capitals of Europe; then he enlisted in the war effort, where he was rapidly promoted to major and decorated by every Allied government, including Montenegro. He pulls out a photograph of himself in Oxford cricket whites, as well as a medal awarded by the government of Montenegro, in order to corroborate his story. They drive very fast through the valley of ashes; when Gatsby is stopped for speeding, he flashes a white card at the policeman. The policeman apologizes profusely and does not give Gatsby a ticket.
At lunch, Gatsby introduces Carraway to Meyer Wolfsheim, a disreputable character who proudly calls their attention to his cufflinks, which are made from human molars. Wolfsheim is an infamous gambler, and claims responsibility for fixing the 1919 World Series. Nick begins to suspect Gatsby of underworld dealings, due to his association with the sinister Wolfsheim.
They happen to run into Tom Buchanan, and Nick introduces him to Gatsby. Gatsby appears highly uncomfortable in Tom's presence and quickly leaves without giving an explanation.
During Nick's next encounter with Jordan Baker, she finally tells him her remarkable news: Gatsby is in love with Daisy Buchanan. Back in 1917, when Daisy was eighteen and Jordan sixteen, the two had been volunteers with the Red Cross. Though all the officers at the military base had courted Daisy, she fell passionately in love with a young lieutenant named Jay Gatsby. Though she had promised to wait for Gatsby's return, she accepted Tom Buchanan's proposal of marriage while Gatsby was still away at war. The night before her wedding, Daisy suddenly realized the enormity of her mistake; she became hysterical and drank herself into a stupor.
According to Jordan, Gatsby bought his house in West Egg just in order to be close to Daisy. It is at this moment that Nick realizes that the green light, toward which he saw Gatsby so plaintively gesturing, is the light that marks the end of the Buchanans' dock. Jordan informs Nick that Gatsby wants him to arrange a reunion between himself and Daisy.
This chapter is primarily concerned with the mystery of Gatsby's background, and of the source of his wealth. Though Nick was first taken with Gatsby's seeming purity and optimism, Gatsby remains enigmatic and not entirely trustworthy. Gatsby's own account of his illustrious past seems comically exaggerated. His readiness to provide evidence to corroborate his story is itself suspect; an honest man, one imagines, would be insulted by Nick's skepticism.
The introduction of Meyer Wolfsheim serves to increase Nick's and the reader's doubts concerning Gatsby's virtue. Nick begins to suspect that the rumors of Gatsby's involvement with organized crime and bootlegging may not be entirely false.
Jordan's story about of Gatsby, by contrast, portrays him as a romantic, forced to worship his lover from afar. Although Jordan implies that there was something in Gatsby's background that caused Daisy's parents to oppose their marriage, it is clear that the young Jay Gatsby was a man of unimpeachable virtue. Fitzgerald draws upon a few centuries of romantic cliché to present Gatsby as the ideal lover: a soldier going off to war, brave and handsome, young and pure. Nick's ambivalence toward Gatsby, in which he finds himself constantly oscillating between admiration and distaste (recall that Nick found the excesses of Gatsby's party repellent), is emphasized in this chapter. The contradiction inherent in Gatsby's character between his guileless optimism and putative moral corruption is also reinforced.
It is important to note that Wolfsheim, the novel's symbolic representative of the "criminal element," is obviously Jewish: Fitzgerald gives the character a number of stereotypical physical features (a large nose, a diminutive stature) that were a staple of racist caricature in the 1920s. During this period, anti-Semitism in America was at an all-time high: Jews, as a result of their "characteristic greed," were held responsible for the corruption of the nation as a whole. Fitzgerald seems to uncritically draw on this racist ideology in his presentation of Wolfsheim; the character is nothing more than a grotesque stereotype.
This chapter also reveals the object of Gatsby's yearning which has been apparent since the first chapter: it was Daisy, and his love for Daisy, that caused him to reach out toward the mysterious green light. The green light serves as a symbol for a number of things: among them are Gatsby's dauntless romantic optimism, Daisy herself, and the American dream.
Even Gatsby's infamous parties are thrown for the sole purpose of attracting Daisy's attention; she is his animating force. Everything Gatsby does and has done is out of love for her: he has reinvented himself as a cultured millionaire solely to court her approval. In this way, Daisy seems to serve as a symbol of the American Dream (at least in its 1920s manifestation); her corruption and emptiness will reveal the corruption that has befallen the great dream itself.