Jo tells Nick that Tom has been having an affair with Myrtle Wilson, a woman who lives in the valley of ashes, ­ an industrial wasteland outside of New York City. After visiting Tom and Daisy, Nick goes home to West Egg; there, he sees Gatsby gazing at a mysterious green light across the bay. Gatsby stretches his arms out toward the light, as though to catch and hold it.

Tom Buchanan takes Nick into New York, and on the way they stop at the garage owned by George Wilson. Wilson is the husband of Myrtle, with whom Tom has been having an affair. Tom tells Myrtle to join them later in the city. Nearby, on an enormous billboard, a pair of bespectacled blue eyes stares down at the barren landscape. These eyes once served as an advertisement; now, they brood over all that occurs in the valley of ashes.

In the city, Tom takes Nick and Myrtle to the apartment in Morningside Heights at which he maintains his affair. There, they have a lurid party with Myrtle's sister, Catherine, and an abrasive couple named McKee. They gossip about Gatsby; Catherine says that he is somehow related to Kaiser Wilhelm, the much-despised ruler of Germany during World War I. The more she drinks, the more aggressive Myrtle becomes; she begins taunting Tom about Daisy, and he reacts by breaking her nose. The party, unsurprisingly, comes to an abrupt end.

Nick Carraway attends a party at Gatsby's mansion, where he runs into Jordan Baker. At the party, few of the attendees know Gatsby; even fewer were formally invited. Before the party, Nick himself had never met Gatsby: he is a strikingly handsome, slightly dandified young man who affects an English accent. Gatsby asks to speak to Jordan Baker alone; after talking with Gatsby for quite a long time, she tells Nick that she has learned some remarkable news. She cannot yet share it with him, however.

Some time later, Gatsby visits Nick's home and invites him to lunch. At this point in the novel, Gatsby's origins are unclear. He claims to come from a wealthy San Francisco family, and says that he was educated at Oxford after serving in the Great War (during which he received a number of decorations). At lunch, Gatsby introduces Nick to his business associate, Meyer Wolfsheim. Wolfhsheim is a notorious criminal; many believe that he is responsible for fixing the 1919 World Series.

Gatsby mysteriously avoids the Buchanans. Later, Jordan Baker explains the reason for Gatsby's anxiety: he had been in love with Daisy Buchanan when they met in Louisville before the war. Jordan subtly intimates that he is still in love with her, and she with him.

Gatsby asks Nick to arrange a meeting between himself and Daisy. Gatsby has meticulously planned their meeting: he gives Daisy a carefully rehearsed tour of his mansion, and is desperate to exhibit his wealth and possessions