Flynn and Rapunzel row out to the middle of a lake to watch the lanterns, and both declare their hidden feelings for each other. Flynn spies his old allies on the shoreline and goes to meet them - but is beat unconscious and tied to a ship which is set on a course for the palace.
Mother Gothel then appears and knocks out the thieves. She tells Rapunzel than Flynn is a thief and is leaving her. Heartbroken, Rapunzel returns with her to the tower.
Back in the tower, Rapunzel sees the sun symbol in her art - and slowly puts two and two together. She questions her mother, who can't keep the lies up any longer.
Flynn is captured at the palace walls and sentenced to hang. On his way to the gallows he is rescued by the men from the Snuggly Duckling - led by Maximus the horse! They all escape, and Flynn reaches the tower. He climbs Rapunzel's hair to get inside - but sees that she has been gagged, and Flynn is stabbed by Mother Gothel.
Rapunzel swears an oath that she will do what Mother Gothel asks if she can just save her love. Flynn grabs a broken mirror sherd and cuts off Rapunzel's hair - breaking her free from her 'curse'. Mother Gothel is distraught and immediately starts to age, then trips and falls out the window and dies in a cloud of dust.
Flynn dies. Rapunzel sings the song again, and cries a tear that hits his face -- restoring him back to health. They kiss.
Rapunzel then returns to her parents, and a huge party is held throughout the Kingdom. The men from the Snuggly Duckling have all fulfilled their dreams too (as a pianist, mime artist and other things), and the two lovers marry and live happily ever after.