Mournfully, Tootles presents Wendy with an arrow in her heart, lying on the ground. Tootles lets Peter strike him with a dagger, but Wendy raises her hand before he can, and the Lost Boys realize she is still alive. Peter notes that the arrow struck the thimble he gave her, which is hanging around her neck. He calls it a "kiss" and notes that it saved her lie.
Tinker Bell flies onto the stage, rejoicing about the death of Wendy, which upsets Peter, who banishes her. Tinker Bell cries, and flies off sulkily. Peter instructs the Lost Boys to build a house around Wendy's body, and they set to work, as John and Michael fly onto the island. They ask where Wendy is and Peter points to her body. The Lost Boys tell Wendy's brothers that they are now her servants, since she is a girl.
Slightly acts as a doctor and puts an imaginary thermometer in Wendy's mouth to take her temperature, pronouncing her cured. He then prescribes her "beef tea out of a cup with a spout to it..." Wendy sings to herself about her fantasy house while her eyes are closed, and the boys build a house around her. Once they have built the house, Wendy emerges, "quite surprised to find that she has nine children."
The Lost Boys present Wendy with the house and themselves, calling themselves her "children." Wendy replies, "...but you see I am only a little girl; I have no real experience." When they tell her they just need someone "motherly," she replies, "Oh dear, I feel that is just exactly what I am." They all go in the house, just as Liza, the maid, appears in Never Land. Peter comes and guards the house, falling asleep at the door.
Act 3. The Mermaids' Lagoon. The mermaids are lounging on the rocks, while Peter and the group play in the water. As Wendy emerges from the water she bemoans the fact that she was unable to catch a mermaid. Peter tells her, "They are such cruel creatures, Wendy, that they try to pull boys and girls like you into the water and drown them."
Peter tells Wendy that the rock they are sitting near is called Marooners' Rock, which is where captains of ships leave their sailors to drown. As the pirates approach the rock, the children hide. Smee and Starkey, two pirates, bring Tiger Lily onto the stage as their captive. The stage direction reads, "...her face is impassive; she is the daughter of a chief and must die as a chief's daughter; it is enough."
Just as they go to tie up Tiger Lily to the rock, Peter affects the voice of Captain Hook perfectly, and tells the pirates to set her free. They do so and Tiger Lily slides into the lagoon. Just then, the real Captain Hook appears, swimming towards the rock. When he arrives, he is upset, telling his pirates, "Those boys have found a mother!"
Smee comes up with a plan to kidnap Wendy and make her the pirates' mother, which Hook likes very much. Hook then asks where Tiger Lily went, and Smee tells him they let her go, based on his orders. Hook is surprised and suggests that he gave no such order.
Suddenly, Peter begins speaking to Hook in Hook's own voice, telling him that he is a codfish, not Hook. Hook plays a guessing game with the voice, until the voice reveals itself to belong to Peter Pan. The boys fight with the pirates, as Peter takes on Captain Hook. As they are fighting, the crocodile arrives and gnashes its teeth at Hook, who flees in fear.
As the boys disperse, Wendy appears on the rock, where she gets snatched by a mermaid trying to drown her. Wendy gets away just in time and convenes with Peter, who tells her she must fly home alone, as Hook wounded him. The stage direction tells us, "He believes it; he is so good at pretend that he feels the pain, his arms hang limp."
Suddenly, Wendy finds a kite that they made Michael and she uses it to carry her back to their home. Peter stays on the rock, as the tide comes in. Just in time, a bird appears with its nest, and Peter uses it as a makeshift sailboat, his shirt acting as a sail. The stage direction ends, "His vessel tacks, and he passes from sight, naked and victorious. The bird returns and sits on the hat."
The world of Never Land is an entirely whimsical one, which follows its own childlike and magical logic. While a tremor of violence underscores the lives of the Lost Boys—hungry crocodiles roam about, the Lost Boys shoot Wendy with a bow and arrow, and Peter nearly stabs Tootles in retaliation for the violence against Wendy—the violence has an absurd quality, mimicking the violence of child's play rather than real violence. In this way, the play of Peter Pan is explicitly theatrical, in that not only are the actions meant to be taken as artificial by virtue of their being contained within a play, but also by virtue of their existing as some kind of extension of the child's imagination, of "make believe."
J.M. Barrie leads the reader through the heightened and imaginative world of the play with his highly instructive and narrative stage directions. Especially in the world of Never Land, where an otherworldly logic prevails, Barrie's stage directions serve as blueprints for immersion in the fantasy. Barrie regularly narrates the emotional states of the children, which puts the reader on their side and opens the reader up to their perspective.
The Darling children, being imaginative youngsters, integrate almost immediately into life on the island of Never Land. They are not squeamish or skeptical of the ways of the island, but rather seem to intuitively understand its rhythms and logics. While the dangers of Never Land are new, it seems to reflect an extension of the imaginative lives that the Darling children have cultivated in their home.
The central conflict between the pirates and the Lost Boys is not simply that Peter caused Captain Hook to lose his arm to the crocodile, but that each group is in desperate search of a mother. Captain Hook's hatred of the Lost Boys is only multiplied when he discovers that they have "found a mother." With this knowledge, the pirates devise a plot to steal Wendy for themselves and make her their mother. The conflict of the play is not only a literal one, but a kind of symbolic one, in which two groups made up exclusively of men search for a maternal influence for their group.
Peter is the prototypical boastful young boy who believes that he can do anything he sets his heart to. The only thing that separates him from other boys of his kind, however, is the fact that his belief in his own abilities is not unfounded, and it turns out that anything he can imagine himself to do, he can actually do. After the fight with Hook, it appears that he will drown on the Marooners Rock, but just in the nick of time is able to fashion a makeshift sailboat out of a nest and his shirt. His character is less of a real person and more of the manifestation or personification of a little boy's wildest imaginings.