Gulliver spends five months at home with his wife, and she is pregnant when he leaves to go to sea once more, this time as captain of a ship. Many of his crew die of illness and he is forced to recruit more. These turn out to be pirates who influence the rest of the crew to mutiny. They leave Gulliver on the shore of a strange country. As Gulliver begins to explore, he sees some strange, deformed creatures with goat-like beards and a ridge of hair down their backs and on part of their legs. They have long claws, which they use to climb trees. Gulliver is repulsed by the creatures' ugliness. When he meets one on his path, he strikes it with the flat of his sword. The beast roars, and many of its fellows flock to join it, climbing into trees and defecating on Gulliver.
Suddenly, they all run away, and Gulliver notices that a horse has arrived. The horse inspects Gulliver and neighs several times in different cadences. Another horse arrives, and the two seem to confer. They appear to be very rational creatures, so much so that Gulliver assumes they are magicians who have transformed themselves into horses. Gulliver asks the horses to take him to a house or village. The horses seem to use two words: "Yahoo," and "Houyhnhnm," which Gulliver learns to say. One horse leaves, and the other leads Gulliver off.
The horse leads Gulliver to a house, in which several horses are sitting and going about domestic business. Gulliver reflects that if the animals here are so advanced, the human beings who civilized them must be the wisest in the world. One of the mares looks at him with contempt and says the word "Yahoo" to the others. He is led into the courtyard, where several of the ugly creatures he saw previously are tied up, eating dead animals. The horses compare Gulliver to these creatures, and Gulliver is shocked to realize that he does resemble them. One horse offers Gulliver some of the food that those creatures eat, which he politely rejects, and some of the horses' hay and oats, which he also rejects. Gulliver points to a cow, and the horses understand his meaning and give him milk to drink.
In this country, the horses ride in carriages drawn by Yahoos. An old horse arrives in one of these vehicles to dine with Gulliver and the horses. They try to work out what Gulliver will eat, and he suggests that they bring him some of their oats, from which he makes bread. He is given a place to sleep on straw.
Gulliver is to spend three years in this country.
Gulliver learns the language of the horses, or Houyhnhnms, as their race is called. They ask him where he came from. When he tells them that he came in a boat from beyond the sea, they cannot believe that such things are possible. They are puzzled by Gulliver, as though he resembles the Yahoos, he is more teachable and rational than they. Gulliver begs them not to call him a Yahoo, as he feels utter contempt for those creatures, and they agree.
While Gulliver feels only disgust at the Yahoos' uncivilized behavior and tries to distance himself from them, it is clear that they are disturbingly close to humans in their nature. The rational Houyhnhnms carefully compare Gulliver with the Yahoos tethered in their yard and cannot easily tell the difference. When they see Gulliver naked, the only differences they note are that he has less hair and shorter claws, and walks on his hind legs. The similarity is underlined by Gulliver's unguarded comment in Chapter II that prefaces his judgment on "those filthy Yahoos": he says, "there were few greater lovers of mankind, at that time, than myself." This comment assumes that the Yahoos are essentially part of mankind. Pathetically, Gulliver clings to his clothes as one of the few proofs of his difference from the Yahoos he despises. Clothes are not an intrinsic part of humanity, but an addition that man has adopted in part as protection from shame about his body, a shame that the enlightened Houyhnhnms cannot comprehend.
Swift's satirical purpose in Part IV is assisted by his reversal of the usual roles of humans and horses in normal society. Gulliver is used to seeing horses serve humans, for instance, by pulling carriages. But in this land, horses ride in carriages pulled by human-like Yahoos, who act as the servants to the horses. In making the horses the rational creatures and the Yahoos ignorant and brutish, Swift is drawing attention to the baser aspects of human nature. He does not make this distinction clear from the beginning, having Gulliver mislead the reader by at first putting forward the idea that the horses are transformed magicians.
Swift gradually allows the reader to realize along with Gulliver, and through his eyes, that here, the horses are in charge of the Yahoos because they are the more advanced species.
Part IV represents a shift in the structure of Gulliver's Travels, which up to this point has shown Gulliver as too large, too small, or too practical for the societies he visits. In this country, he stands out because he is not rational enough. Swift is preparing the reader for his most severe condemnation of mankind.