Lennie hallucinates and sees his deceased Aunt Clara. In his hallucination she is scolding him for his actions. The hallucinations are due to how stressed he is. He is feeling guilty for killing Curley's wife.
Lennie has yet another hallucination of a giant rabbit, also scolding him for his actions. The rabbit claims that George is going to beat him up for everything he has done.
George appears and Lennie is scared that he is going to hurt him but George reassures him that he is okay. Lennie relaxes and calms down.
Lennie asks George to tell about the rabbits and George does so. He asks Lennie to face the river so he can visualize their dream. George takes out his gun.
George shoots Lennie in the back of his head. After Lennie dies George begins to realize the consequences of his actions.
When the other men arrive they see Lennie dead. George tells him they were fighting over the gun and he shot him out of self defense. This doesn't make sense because he is shot in the back of his head, but the men don't question him.