Harold sets up Zaneeta, the mayor's eldest daughter, with Tommy, and persuades Tommy to work as his assistant.

They warn Harold that she advocates "dirty books" by Chaucer, Rabelais, and Balzac ("Pick-a-Little, Talk-a-Little").

Discovering evidence against Harold in the Indiana State Educational Journal, Marion sets out to inform Mayor Shinn, but they are interrupted by the arrival of the Wells Fargo wagon with the new band instruments ("The Wells Fargo Wagon"). Winthrop is so excited about his new cornet that he forgets to be shy and self-conscious, and Marian, beginning to see Harold in a new light, tears the incriminating page out of the Journal before giving it to the mayor.

Harold tells the boys they will learn to play by using the "Think System". According to this system, if they simply think of a tune over and over, they will eventually know how to play it without ever touching their instruments. When Marian questions his claim that "you don't have to bother with the notes," he arranges to call on her to discuss it.

Winthrop returns home after spending time with Harold and tells Marian and Mrs. Paroo about Harold's hometown ("Gary, Indiana").

Traveling salesman Charlie Cowell appears with evidence against Harold, but he only has a few minutes to tell the mayor before his train leaves. Marion delays him by flirting and eventually kissing him so that he won't have time to deliver the evidence. When the train whistle blows, she pushes him away, and Charlie angrily tells her that Harold has a girl in "every county in Illinois, and he's taken it from every one of them--and that's 102 counties!"

They agree to meet at the footbridge, where Marian tells him the difference he's made in her life ("Till There Was You").

Harold claims to have graduated from the Gary Conservatory in 1905, but Gary, Indiana, wasn't founded until 1906.

Cowell, who has missed his train, arrives at the ice cream social and denounces Harold as a fraud. Winthrop is heartbroken and says that he wishes Harold never came to River City. But Marian tells Winthrop that she believes everything Harold ever said, for it did come true in the way every kid in town talked and acted all summer.

As the town is deciding what to do with Harold, Tommy enters as a drum major, followed by the kids in uniform with their instruments. Marian urges Harold to lead the River City Boys' Band in Beethoven's "Minuet in G". Despite the boys' limited musical ability, the townspeople are nonetheless enraptured by the sight of their children playing music. Even Mayor Shinn is won over, and Harold is released into Marian's arms ("Finale").