Cervantes wrote that the first chapters were taken from "the archives of La Mancha", and the rest were translated from an Arabic text by the Moorish author Cide Hamete Benengeli. This metafictional trick appears to give a greater credibility to the text, implying that Don Quixote is a real character and that the events related truly occurred several decades prior to the recording of this account. However, it was also common practice in that era for fictional works to make some pretense of being factual, such as the common opening line of fairy tales "Once upon a time in a land far away..."
In the course of their travels, the protagonists meet innkeepers, prostitutes, goat-herders, soldiers, priests, escaped convicts and scorned lovers. The aforementioned characters sometimes tell tales that incorporate events from the real world, like the conquest of the Kingdom of Maynila or battles in the Eighty Years' War. Their encounters are magnified by Don Quixote's imagination into chivalrous quests. Don Quixote's tendency to intervene violently in matters irrelevant to himself, and his habit of not paying debts, result in privations, injuries, and humiliations (with Sancho often the victim). Finally, Don Quixote is persuaded to return to his home village. The narrator hints that there was a third quest, but says that records of it have been lost.
The First Sally (Chapters 1–5)
Alonso Quixano, the protagonist of the novel (though he is not given this name until much later in the book), is a Hidalgo (member of the lesser Spanish nobility), nearing 50 years of age, living in an unnamed section of La Mancha with his niece and housekeeper, as well as a boy who is never heard of again after the first chapter. Although Quixano is usually a rational man, in keeping with the humoral physiology theory of the time, not sleeping adequately — because he was reading — has caused his brain to dry; Quixano's temperament is thus choleric, the hot and dry humor. As a result, he is easily given to anger and believes every word of these fictional books of chivalry to be true.
Imitating the protagonists of these books, he decides to become a knight-errant in search of adventure. To these ends, he dons an old suit of armour, renames himself "Don Quixote", names his exhausted horse "Rocinante", and designates Aldonza Lorenzo, a neighboring farm girl, as his lady love, renaming her Dulcinea del Toboso, while she knows nothing of this. Expecting to become famous quickly, he arrives at an inn, which he believes to be a castle; calls the prostitutes he meets "ladies" (doncellas); and asks the innkeeper, whom he takes as the lord of the castle, to dub him a knight. He spends the night holding vigil over his armor and becomes involved in a fight with muleteers who try to remove his armor from the horse trough so that they can water their mules. In a pretended ceremony, the innkeeper dubs him a knight to be rid of him and sends him on his way.
Don Quixote next "frees" a young boy named Andres who is tied to a tree and beaten by his master, and makes his master swear to treat the boy fairly; but the boy's beating is continued as soon as Quixote leaves. Don Quixote then encounters traders from Toledo, who "insult" the imaginary Dulcinea. He attacks them, only to be severely beaten and left on the side of the road, and is returned to his home by a neighbouring peasant.
Destruction of Don Quixote's library (Chapters 6 and 7)
While Don Quixote is unconscious in his bed, his niece, the housekeeper, the parish curate and the local barber burn most of his chivalric and other books. A large part of this section consists of the priest deciding which books deserve to be burned and which to be saved. It is a scene of high comedy: If the books are so bad for morality, how does the priest know them well enough to describe every naughty scene? Even so, this gives an occasion for many comments on books Cervantes himself liked and disliked. For example, Cervantes' own pastoral novel La Galatea is saved, while the rather unbelievable romance Felixmarte de Hyrcania is burned. After the books are dealt with, they seal up the room which contained the library, later telling Don Quixote that it was the action of a wizard (encantador).
The Second Sally
After a short period of feigning health, Don Quixote requests his neighbour, Sancho Panza, to be his squire, promising him a petty governorship (ínsula). Sancho is a poor and simple farmer but more practical than the head-in-the-clouds Don Quixote and agrees to the offer, sneaking away with Don Quixote in the early dawn. It is here that their famous adventures begin, starting with Don Quixote's attack on windmills that he believes to be ferocious giants.
The two next encounter a group of friars accompanying a lady in a carriage. Don Quixote takes the friars to be enchanters who hold the lady captive, knocks a friar from his horse, and is immediately challenged by an armed Basque traveling with the company. As he has no shield, the Basque uses a pillow to protect himself, which saves him when Don Quixote strikes him. Cervantes chooses this point, in the middle of the battle, to say that his source ends here. Soon, however, he resumes Don Quixote's adventures after a story about finding Arabic notebooks containing the rest of the story by Cid Hamet Ben Engeli. The combat ends with the lady leaving her carriage and commanding those traveling with her to "surrender" to Don Quixote.
The Pastoral Peregrinations (Chapters 11–15)
Sancho and Don Quixote fall in with a group of goat herders. Don Quixote tells Sancho and the goat herders about the "Golden Age" of man, in which property does not exist and men live in peace. The goatherders invite the Knight and Sancho to the funeral of Grisóstomo, a former student who left his studies to become a shepherd after reading pastoral novels (paralleling Don Quixote's decision to become a knight), seeking the shepherdess Marcela. At the funeral Marcela appears, vindicating herself from the bitter verses written about her by Grisóstomo, and claiming her own autonomy and freedom from expectations put on her by pastoral clichés. She disappears into the woods, and Don Quixote and Sancho follow. Ultimately giving up, the two dismount by a pond to rest. Some Galicians arrive to water their ponies, and Rocinante (Don Quixote's horse) attempts to mate with the ponies. The Galicians hit Rocinante with clubs to dissuade him, whereupon Don Quixote tries to defend Rocinante. The Galicians beat Don Quixote and Sancho, leaving them in great pain.
The inn (Chapters 16–17)
After escaping the musketeers, Don Quixote and Sancho ride to a nearby inn. Once again, Don Quixote imagines the inn is a castle, although Sancho is not quite convinced. Don Quixote is given a bed in a former hayloft, and Sancho sleeps on the rug next to the bed; they share the loft with a muleteer. When night comes, Don Quixote imagines the servant girl at the inn, Helen, to be a beautiful princess, and makes her sit on his bed with him, scaring her. Seeing what is happening, the muleteer attacks Don Quixote, breaking the fragile bed and leading to a large and chaotic fight in which Don Quixote and Sancho are once again badly hurt. Don Quixote's explanation for everything is that they fought with an enchanted Moor. He also believes that he can cure their wounds with a mixture he calls "the balm of Firearbras", which only makes them sick. Don Quixote and Sancho decide to leave the inn, but Quixote, following the example of the fictional knights, leaves without paying. Sancho, however, remains and ends up wrapped in a blanket and tossed up in the air (blanketed) by several mischievous guests at the inn, something that is often mentioned over the rest of the novel. After his release, he and Don Quixote continue their travels.
The galley slaves and Cardenio (Chapters 19–24)
After Don Quixote has adventures involving a dead body, a helmet, and freeing a group of galley slaves, he and Sancho wander into the Sierra Morena and there encounter the dejected Cardenio. Cardenio relates the first part of his story, in which he falls deeply in love with his childhood friend Luscinda, and is hired as the companion to the Duke's son, leading to his friendship with the Duke's younger son, Don Fernando. Cardenio confides in Don Fernando his love for Luscinda and the delays in their engagement, caused by Cardenio's desire to keep with tradition. After reading Cardenio's poems praising Luscinda, Don Fernando falls in love with her. Don Quixote interrupts when Cardenio suggests that his beloved may have become unfaithful after the formulaic stories of spurned lovers in chivalric novels. They get into a fight, ending with Cardenio beating all of them and walking away to the mountains.
The priest, the barber, and Dorotea (Chapters 25–31)
Quixote pines for Dulcinea, imitating Cardenio. Quixote sends Sancho to deliver a letter to Dulcinea, but instead Sancho finds the barber and priest and brings them to Quixote. The priest and barber make plans to trick Don Quixote to come home. They get the help of Dorotea, a woman who has been deceived by Don Fernando. She pretends that she is the Princess Micomicona and desperate to get Quixote's help. Quixote runs into Andres, who insults his incompetence.
Return to the inn (Chapters 32–42)
The group returns to the previous inn where the priest tells the story of Anselmo while Quixote battles with wineskins. Dorotea is reunited with Don Fernando and Cardenio with Lucinda. A captive from Moorish lands arrives and is asked to tell the story of his life. A judge arrives, and it is found that the captive is his long-lost brother, and the two are reunited.
The ending (Chapters 45–52)
An officer of the Santa Hermandad has a warrant for Quixote's arrest for freeing the galley-slaves. The priest begs for the officer to have mercy on account of Quixote’s insanity. The officer agrees, and Quixote is locked in a cage and made to think that it is an enchantment and that there is a prophecy of his heroic return home. While traveling, the group stops to eat and lets Quixote out of the cage, and he gets into a fight with a goatherd and with a group of pilgrims, who beat him into submission, and he is finally brought home. The narrator ends the story by saying that he has found manuscripts of Quixote's further adventures.
Although the two parts are now published as a single work, Don Quixote, Part Two was a sequel published ten years after the original novel. While Part One was mostly farcical, the second half is more serious and philosophical about the theme of deception.
Part Two of Don Quixote explores the concept of a character understanding that he is written about, an idea much explored in the 20th century.
The Third Sally
As Part Two begins, it is assumed that the literate classes of Spain have all read the first part of the story. Cervantes's meta-fictional device was to make even the characters in the story familiar with the publication of Part One, as well as with an actually published, fraudulent Part Two. When strangers encounter the duo in person, they already know their famous history. A Duke and Duchess, and others, deceive Don Quixote for entertainment, setting forth a string of imagined adventures resulting in a series of practical jokes. Some of them put Don Quixote's sense of chivalry and his devotion to Dulcinea through many tests. Pressed into finding Dulcinea, Sancho brings back three ragged peasant girls and tells Don Quixote that they are Dulcinea and her ladies-in-waiting. When Don Quixote only sees the peasant girls, Sancho pretends (reversing some incidents of Part One) that their derelict appearance results from an enchantment.
Sancho later gets his comeuppance for this when, as part of one of the Duke and Duchess's pranks, the two are led to believe that the only method to release Dulcinea from her spell is for Sancho to give himself three thousand three hundred lashes. Sancho naturally resists this course of action, leading to friction with his master. Under the Duke's patronage, Sancho eventually gets a governorship, though it is false; and he proves to be a wise and practical ruler; though this ends in humiliation as well. Near the end, Don Quixote reluctantly sways towards sanity.
The lengthy untold "history" of Don Quixote's adventures in knight-errantry comes to a close after his battle with the Knight of the White Moon (a young man from Don Quixote's hometown who had previously posed as the Knight of Mirrors) on the beach in Barcelona, in which the reader finds him conquered. Bound by the rules of chivalry, Don Quixote submits to prearranged terms that the vanquished is to obey the will of the conqueror: here, it is that Don Quixote is to lay down his arms and cease his acts of chivalry for the period of one year (in which he may be cured of his madness). He and Sancho undergo one more prank by the Duke and Duchess before setting off.
Upon returning to his village, Don Quixote announces his plan to retire to the countryside as a shepherd, but his housekeeper urges him to stay at home. Soon after, he retires to his bed with a deathly illness, and later awakes from a dream, having fully recovered his sanity. Sancho tries to restore his faith, but Quixano (his proper name) only renounces his previous ambition and apologizes for the harm he has caused. He dictates his will, which includes a provision that his niece will be disinherited if she marries a man who reads books of chivalry. After Alonso Quixano dies, the author emphasizes that there are no more adventures to relate and that any further books about Don Quixote would be spurious.