Ammu has a dream in which a one-armed man with really hot abs holds her close. The two of them are surrounded by people watching them (we get the sense that Mammachi and the kids are among them). They go out to the water and swim.
As she dreams, Ammu realizes her kids are watching her. Rahel asks if Ammu is dead; Estha says she is having an afternoon-mare.
While Ammu is still half-asleep, the narrator asks, rhetorically, who the one-armed man is. Is he the God of Loss? The God of Small Things? (Aw, look out! – we've got our title.)
Rahel says they shouldn't wake Ammu up because she could have a heart attack. The twins roam around her room whispering and clearing their throats to gently wake her up. Ammu, still half-dreaming, aches with love for them.
Ammu wakes up. Estha tells her she looked sad while she was asleep. Ammu realizes she was really happy.
Estha asks if it counts if you're happy in a dream.
They listen to a song on the radio about two lovers who make a suicide pact.
Ammu notices that Rahel and Estha are covered in dust, and Rahel has a curl of shaved wood in her hair. She knows they've been with Velutha. She tells them not to go there anymore because it will only cause trouble.
Ammu realizes she knows who "The God of Loss, The God of Small Things" is.
Estha and Rahel snuggle up to Ammu and play with her stretch marks. Ammu gets tired of them touching her and goes to look at herself in the bathroom mirror.
As Ammu checks out her naked body in the mirror, she starts to feel like her life has already been lived. She thinks about madness and death and fears for her future. She tries to weep for herself, The God of Small Things, and the kids.
We find out that Ammu will be locked in the bedroom after Sophie Mol's death and that Chacko will break down the door and throw her out of the house.
We also learn more about how Estha is returned, and we get a laundry list of everything that Ammu packs for him.