Babe falls down, and he takes her to dinner. The editor likes Babe's story on the Cinderella man. Babe, calling herself Mary Dawson, shows Deeds around town. He admires the America of Grant and quotes Thoreau. He jumps on a fire truck to help.
Deeds comes in, and they go out walking.
Deeds says he's going home. He hopes to replace his imaginary girl with someone real, and he gives her a love poem. She embraces him, and he runs off. Babe tells her editor that Deeds proposed, and she cries. Cobb proves to Deeds that Babe is a reporter.