Baby Doe, at the hotel, realizes she must end her relationship with Horace and tells the hotel workers to find out when the next train leaves for Denver. The hotel workers go to find Horace so he can head her off. She sings of her love for Horace in a letter to her mother (the "Letter Aria"). Augusta comes in and tells Baby to leave. She agrees, but pleads that she and Horace have done nothing they should be ashamed of ("I Knew It Was Wrong"). When Augusta leaves, Baby decides against leaving at the same time Horace comes in. They sing of their love.