Captain Corcoran is alone on deck with his guitar and sings to the moon of his troubles. Little Buttercup comes to him and reveals her affection. He tells her that because of his rank he can never be more to her than a friend; but she hints darkly that a change is in store for him, and "things are seldom what they seem."
Sir Joseph returns, complaining that Josephine does not favor his suit. The Captain comforts him by theorizing that she is dazzled by his lofty station and suggests that he plead his cause on the ground that "love levels all ranks". When Josephine hears this argument, she considers how eloquently Sir Joseph has stated the justification for her to marry Ralph!
Dick Deadeye finds the Captain alone and reveals the planned elopement. He and the Captain lie in wait for the crew, who steal in "carefully on tip-toe." The Captain confronts the elopers and is so exasperated that he actually swears a foul oath: "Damme!" which is overheard by Sir Joseph
Porter. Judging first and asking questions later, Sir Joseph orders the Captain to go to his cabin for this "ill-advised asperity."
Upon inquiry, Sir Joseph finds out that Ralph and Josephine love one another and orders the "presumptuous" sailor to the brig. Affairs are interrupted by Little Buttercup, who discloses her long-concealed secret: As their foster
mother, she had accidentally exchanged the Captain and Ralph while they were both babies.
Sir Joseph immediately sends for Ralph (who is now Captain) and the Captain (who is now a humble seaman). Since it is "out of the question" for Sir Joseph to marry the daughter of a mere sailor, his Lordship nobly consents to the marriage of Ralph and Josephine. The former Captain is now free to marry dear Little Buttercup, and Sir Joseph agrees to marry his longtime admirer, cousin Hebe. All ends with "joy and rapture unforseen," for "he is an Englishman!" Hip, Hip, Horray!