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Algebraic K-theory describes a branch of algebra that centers about two functors. K0 and K1, which assign to each associative ring ¿ an abelian group K0¿ or K1¿ respectively. Professor Milnor sets out, in the present work, to define and study an analogous functor K2, also from associative rings to abelian groups. Just as functors K0 and K1 are important to geometric topologists, K2 is now considered to have similar topological applications. The exposition includes, besides K-theory, a considerable amount of related arithmetic.