Elizabeth-Jane regrets that she has upset Henchard by dancing with Farfrae. She leaves the tent and stands thinking. After a short time, Farfrae joins her to say that, were circumstances different, he would have asked her something that night. He tells her that he is thinking of leaving Casterbridge, and she says that she wishes he would stay. Later, she is relieved to hear that Farfrae has purchased a small own corn and hay business of his own in Casterbridge. Upset by what he takes to be Farfrae's coup, Henchard requests that Elizabeth-Jane break all ties with Farfrae and sends a letter to Farfrae asking the same from him. Elizabeth-Jane dutifully obeys Henchard and engages in no further contact with Farfrae. As Farfrae's new business grows, Henchard becomes increasingly embittered.
Susan falls ill. Henchard receives a letter from , the woman from Jersey with whom he was having an affair. In it she says that she honors his decision to remarry his first wife and understands the impossibility of any further communication between them. She also requests that he return to her the love letters she has written him. She suggests that he do her this favor in person and announces that she will be on a coach passing through Casterbridge. Henchard goes to meet the coach, but Lucetta is not there.
Meanwhile, Susan has gotten worse. One night, she asks Elizabeth-Jane to bring her a pen and paper. She writes a letter, which she seals and marks with the words "Mr. Michael Henchard. Not to be opened till Elizabeth-Jane's wedding-day." Susan also admits to Elizabeth-Jane that it was she who wrote the notes that caused Elizabeth-Jane and Farfrae to meet at the farm, hoping that the two would fall in love and marry.
Soon thereafter, Susan dies. Farfrae hears some of the old inhabitants of the village discussing her death. One villager, , relates that Susan had laid out all the necessary preparations for her burial, including four pennies for weighting down her eyes. After Susan is buried, , a poor townsman, digs up her body to retrieve the pennies, arguing that death should not rob life of fourpence.
One night, about three weeks after Susan's death, decides to tell -Jane the truth about the relationship between him and her mother. Henchard does not admit that he sold the pair, but he does tell Elizabeth-Jane that he is her father and that, during Elizabeth-Jane's childhood, he and her mother each thought the other dead.
Henchard asks Elizabeth-Jane to draw up a paragraph for the newspaper announcing that she will change her name to Henchard and then leaves her alone to collect her thoughts. He goes upstairs to search for some documents to prove his relationship to Elizabeth-Jane and discovers the letter that Susan wrote before her death. Despite the request to leave the letter unread until Elizabeth-Jane's wedding-day, Henchard opens it and learns that Elizabeth-Jane is not, in fact, his daughter. The letter informs him that his child died shortly after he and his family parted ways and that the young woman he has welcomed into his home is actually the daughter of the who purchased Susan at Weydon-Priors.
In the morning, Elizabeth-Jane comes to Henchard and tells him that she now intends to look upon him as her true father. Henchard's discovery of the night before renders her acceptance of him bittersweet, but he decides not to traumatize Elizabeth-Jane further with this additional surprise.
Though Elizabeth-Jane continues to live under his roof, Henchard becomes increasingly cold and distant toward her. He criticizes her country dialect, telling her that such language makes her "only fit to carry wash to a pig-trough," and describes her handwriting as unrefined and unwomanly. One afternoon, Henchard reprimands Elizabeth-Jane for bringing , one of the workers in his hay-yard, some bread and cheese. When Nance overhears Henchard insult her character, she tells Henchard that Elizabeth-Jane has waited on worse for hire. Elizabeth-Jane confirms that she once worked at the Three Mariners Inn, leaving Henchard shocked and afraid that Elizabeth-Jane has compromised his reputation through her menial labor. One morning, on her way to visit Susan's grave, Elizabeth-Jane sees a well-dressed lady studying Susan's tombstone. Intrigued, Elizabeth-Jane wonders who she is and thinks about her on the way home.
Meanwhile, Henchard's term as mayor is about to end, and he learns that he will not be named one of the town's aldermen. In light of this fact, he becomes even more annoyed that Elizabeth-Jane was once a servant at the Three Mariners Inn. Henchard is further rankled when he learns that she served . Considering Elizabeth-Jane a burden of which he would like to rid himself, Henchard writes to Farfrae withdrawing his disapproval of their courtship. The next day, Elizabeth-Jane meets the well-dressed lady in the churchyard. As they talk, Elizabeth-Jane reveals that she is not entirely happy with her father. The lady asks if Elizabeth-Jane will come live with her as a companion, explaining that she is about to move into High-Place Hall, near the center of Casterbridge. Elizabeth-Jane gladly agrees, and the lady arranges to meet her again in a week.
During the next week, Elizabeth-Jane walks by High-Place Hall many times and thinks about what it will be like to live there. One day, while looking at the house, she hears someone approaching and hides. Henchard enters the house without noticing or being noticed by Elizabeth-Jane. Later that day, Elizabeth-Jane asks Henchard if he has any objection to her leaving his house. He answers that he has no objections whatsoever and even offers to give her an allowance.
The appointed day for Elizabeth-Jane's meeting with the well-dressed lady arrives, and she goes to the churchyard as planned. The lady is there and introduces herself as . She tells Elizabeth-Jane that she can join her at High-Place Hall immediately, and Elizabeth-Jane rushes home to pack her things. Watching her, Henchard regrets his treatment of Elizabeth-Jane and asks her to stay. But she cannot, she says, since she is on her way to High-Place Hall, leaving Henchard dumbfounded.
The narrator shifts back to the night prior to Elizabeth-Jane's departure, on which Henchard receives a letter from Lucetta announcing that she has moved to Casterbridge and will take up residence at High-Place Hall. He then receives another letter, shortly after Elizabeth-Jane leaves, in which Lucetta asks him to call on her. He goes that night but is told that she is busy, though she would be happy to see him the next day. Upset by this rebuff, he resolves not to visit her. The next day, Lucetta waits expectantly for Henchard and is disappointed when he does not come. While she waits, she and Elizabeth-Jane look out on the market and discuss the town and its inhabitants.
Several days pass without a visit from Henchard. Three days later, Lucetta comments to Elizabeth-Jane that Henchard may come to visit her (Elizabeth-Jane). Elizabeth-Jane tells Lucetta that she does not believe that he will, because they have quarreled too deeply. Lucetta then decides to send Elizabeth-Jane on some useless errands and quickly writes a letter to Henchard saying that she has sent Elizabeth-Jane away and asking him to visit. A visitor finally arrives, but when he enters Lucetta sees that he is not Henchard.