Act 4. The Home Under the Ground. The audience can see both the Lost Boys' underground lair and the Indians aboveground, guarding the children from the pirates. The Lost Boys are eating, while the Indians squat on blankets, and the only way to communicate is through the hollow trees around them.
Tinker Bell's home is described as "...a lovely hole, the size of a band-box, with a gay curtain drawn across so that you cannot see what is inside." The Lost Boys eat an imaginary meal, loudly, until Wendy tells them to quiet down. John asks Wendy if he can sit in Peter's chair, since Peter is absent, and refers to Peter as his "father." Wendy tells him he cannot sit there, and Tootles asks if he can be the baby of the family instead of Michael. Michael complains that he is too big for his cradle, but Wendy insists. They clear the table.
Peter approaches Tiger Lily and she tells him that she feels loyal to him and is guarding his home. He then descends into his home, and he and Wendy decide that it is Saturday, as Wendy tells the boys to put on their nightclothes. Suddenly, frightened, Peter asks Wendy, "It is only pretend, isn't it, that I am their father?" Wendy tells him that they don't have to be if he doesn't want it to be so. A little hurt, Wendy asks Peter about his feelings for her, and he tells her that he thinks of her as a mother. Peter worries that Wendy and Tiger Lily want more from him, but in response, Wendy simply says, "It isn't for a lady to tell."
Wendy inspects the boys for cleanliness, and "Slightly is the worst." They then all get into their tightly packed beds and Wendy tells a story about her parents, Mr. and Mrs. Darling, and about herself. She tells the story of the Darling children flying to Never Land, which dazzles the Lost Boys. In the story, she says, "...Our heroine [Wendy] knew that her mother would always leave the window open for her progeny to fly back by; so they stayed away for years and had a lovely time." The story extends into the future, a future in which the boys come and visit the Darlings at their home.
Peter interrupts the story with a groan, saying, "I thought like you about the window, so I stayed away for moons and moons, and then I flew back, but the window was barred, for my mother had forgotten all about me and there was another little boy sleeping in my bed."
With this, the Darling children become frightened that their mother has done the same thing and resolve to leave Never Land that night. Peter makes the arrangements, saying that the Indians will lead the Darling children through the forest and Tinker Bell will carry them across the sea. Tinker Bell resists, as Wendy tells the Lost Boys, "Dear ones, if you will all come with me I feel almost sure I can get my father and mother to adopt you." They want to, and ask Peter's permission. He agrees, but refuses to come along, telling them all, "I just want always to be a little boy and to have fun."
In the middle of their conversation, the pirates fall upon the Indians and defeat them. Peter hears that the battle has happened and tells the Lost Boys that if the Indians have won, they will beat the tom-tom. Hook tells Smee to get a tom-tom and he beats on it with his hook, leading the boys to think the Indians have won. They rejoice and prepare for their journey.
Meanwhile, Wendy tells Peter to change his flannels and to take his medicine, which she puts in a shell on the ledge. The stage direction tells us, "It is only water, but she measures it out in drops." When Wendy and the boys go outside, they are apprehended by Hook and his men and taken off to Hook's ship, the Jolly Roger. Hook then goes into the boys' lair. Barrie describes him: "The man is not wholly evil: he has a Thesaurus in his cabin, and is no mean performer on the flute. What really warps him is a presentiment that he is about to fail."
Hook adds poison to the medicine that Wendy left for Peter, then leaves. Tinker Bell, having seen what happened to the Lost Boys, awakens Peter and tells him all she knows, before noting that Peter's medicine is a red color and must be poisoned. Before he can drink it, Tinker Bell drinks it herself. Seeing that Tinker Bell is dying, Peter implores the audience to clap if they believe in fairies. The stage directions read: "Many clap, some don't, a few hiss. Then perhaps there is a rush of Nanas to the nurseries to see what on earth is happening. But Tink is saved."
With Tinker Bell saved, Peter rushes off to save Wendy and the boys.
The play is filled with curious scenarios and images that would present quite a creative challenge to any director or designer. Act 4 opens on a scene that is both underground and aboveground, with the Lost Boys peopling the underground lair and the Indians walking around above the ground. In the below-ground lair, a number of whimsical rooms and compartments make up the scenery; Barrie writes, "Their seats are pumpkins or the large gay mushrooms of which we have seen an imitation one concealing the chimney...Michael's basket bed is nailed high up on the wall as if to protect him from the cat, but there is no indication at present of where the others sleep."
Even more elaborate than the elements of the set that are visible onstage are the images unseen. True to his more novelistic form, Barrie describes in detail even the elements of the setting which cannot be seen. For instance, he describes Tinker Bell's chamber thusly: "...it is just as well that you cannot see inside, for it is so exquisite in its decoration and in the personal apparel spread out on the bed that you could scarcely resist making off with something." In this magical world, even the elements that are not immediately visible are richly realized.
In the underground lair of the Lost Boys, Peter and Wendy become the surrogate father and mother of the orphans. While they are both only children, they each loosely exhibit maternal and paternal characteristics, which make them well-suited for their roles. Peter protects the household and presides over it, while Wendy provides emotional support and more feminine affection to the boys.
What makes the dynamic between Peter and Wendy as "mother" and "father" comic is the fact that they are just children, and that their relationship lacks an element of romantic love. Peter wonders if Wendy wants something more from him, and compares her longing to something he senses in Tiger Lily, the other young woman in his life. While the young women in Peter's life want him to feel a kind of adult affection for them, he is unable to, and thus we see that Peter's eternal boyishness extends to his attitude towards romance and erotic maturation, a kind of arrested Oedipal stage.
In this section of the play, a barrier between audience and performer is breached, after Tinker Bell ingests Peter's poisoned medicine for him. As Tink's light flickers, it appears that she may die for her beloved Peter, but Peter quickly enlists the help of those witnessing the event, and asks them to access their own inner child. Speaking "he knows not to whom, perhaps to the boys and girls of whom he is not one," Peter asks them to clap their hands if they believe in fairies. It is the applause (no matter how limited) in response to this question that saves Tinker Bell, which confirms what Peter has already proclaimed to be true: that people's belief in something magical is what makes it real.