MacNeice moved into Geoffrey Grigson's former flat in Hampstead with Daniel and his nurse. His translation of Aeschylus's Agamemnon was published in late 1936, and produced by the Group Theatre (London). Shortly afterwards his divorce from Mary was finalised. They continued to write frequent affectionate letters to one another, although Mary married Katzmann shortly after the divorce, and MacNeice started an affair with Nancy Coldstream. Nancy was, like her husband Bill, a painter and a friend of Auden who had introduced the couple to MacNeice while they were in Birmingham. MacNeice and Nancy visited the Hebrides in 1937, which resulted in a book of prose and verse written by MacNeice with illustrations by Nancy, I Crossed the Minch.
August 1937 saw the appearance of Letters from Iceland (which had been finished by the two authors in MacNeice's London home the previous year), and towards the end of the year a play called Out of the Picture was published and produced by the Group Theatre. Music was written for the production by Benjamin Britten, as he had done previously for Agamemnon. In 1938, Faber and Faber published a second collection of poems, The Earth Compels, the Oxford University Press published Modern Poetry, and Nancy once again contributed illustrations to a book about London Zoo, called simply Zoo.
As the year - and his relationship with Nancy - drew to a close, he started work on Autumn Journal. By Christmas, Nancy was in love with Stephen Spender's brother Michael, whom she was later to marry, and at the end of the year MacNeice visited Barcelona shortly before the city fell to Franco. The poem was finished by February 1939, and published in May. It is widely viewed as MacNeice's masterpiece, recording his feelings as the Spanish civil war raged and the United Kingdom headed towards war with Germany, as well as his personal concerns and reflections over the past decade.