The play spans only the last two years of Richard's life, from 1398 to 1400.

The first Act begins with King Richard sitting majestically on his throne in full state, having been requested to arbitrate a dispute between Thomas Mowbray and Richard's cousin, Henry Bolingbroke, later Henry IV, who has accused Mowbray of squandering money given to him by Richard for the king's soldiers and of murdering Bolingbroke's uncle, the Duke of Gloucester.

Bolingbroke's father, John of Gaunt, 1st Duke of Lancaster, meanwhile, believes it was Richard himself who was responsible for his brother's murder.

After several attempts to calm both men, Richard acquiesces and it is determined that the matter be resolved in the established method of trial by battle between Bolingbroke and Mowbray, despite the objections of Gaunt.The tournament scene is very formal with a long, ceremonial introduction, but as the combatants are about to fight, Richard interrupts and sentences both to banishment from England.

Bolingbroke is originally sentenced to ten years' banishment, but Richard reduces this to six years upon seeing John of Gaunt's grieving face, while Mowbray is banished permanently.