Olivia confesses her love to Cesario directly. Cesario refuses and delivers the play's most concentrated statement of disguise: 'I am not what I am.'
Cesario arrives at Olivia's house and encounters Feste, who banters about words and their meanings. Cesario appreciates the wit while noting that a fool needs intelligence to play the fool well. Sir Toby and Sir Andrew appear briefly, then Olivia enters with Maria. She dismisses everyone so she can speak with Cesario alone.
Once they are alone, Olivia abandons all pretence and confesses her love directly. She has sent the ring; now she says what she means. Cesario refuses her. There is no cruelty in the refusal but no ambiguity either. Cesario presses Orsino's case again. Olivia refuses Orsino again.
They speak a brief exchange in which Olivia says she thinks Cesario is not what he is, and Cesario responds: "Then think you right: I am not what I am." Olivia says she wishes Cesario were what she wanted him to be. Cesario says one heart, one truth, and no woman shall ever be mistress of it. They part.
Alone, Olivia marvels at how completely she has fallen.
This scene is the play's most direct collision between disguise and feeling. Olivia's confession is as honest as it is transgressive: she is a countess confessing love to a servant, and she is the one who initiates it. Shakespeare gives her this boldness without making it ridiculous. Her feeling is real, and her language is clear. She is not performing; she is simply stating what she can no longer conceal.
"I am not what I am" is the play's most compressed and precise statement of its central theme. Every word is true. Cesario is not a man. Viola is not Cesario. The person Olivia loves does not exist. The sentence functions as a refusal, an honest confession, and a riddle simultaneously. Olivia hears it as part of the exchange between them; the audience hears it as the truest thing in the scene.
The exchange that precedes it is equally constructed. Olivia says she thinks Cesario is not what he appears to be; Cesario says she is right. Olivia means that she suspects Cesario of secret feelings she is not admitting; Cesario means something altogether different and more fundamental. The same words carry entirely different meanings for each speaker, which is the play's version of dramatic irony at its most precise.
Cesario's final speech, "By innocence I swear, and by my youth, / I have one heart, one bosom and one truth, / And that no woman has; nor never none / Shall mistress be of it, save I alone," is also a double statement. On the surface it is a refusal: no woman will be given my heart. Beneath the surface it is entirely accurate: the only woman who has Cesario's heart is Viola herself, and she has given it to Orsino.