Caspian points out that the bracelet the dragon is wearing bears the symbol of one of the seven missing lords – Lord Octesian.
Reepicheep asks the dragon if it has eaten Lord Octesian. The dragon shakes its head.
Lucy suggests the dragon might be Lord Octesian under a spell. The dragon shakes its head. Then she asks if it is some other human being under a spell, and it nods. They realize that the dragon is Eustace.
The dragon cries and Lucy tries to comfort him. Everyone assures Eustace that they won't desert him and that they'll try to find a way to disenchant him.
Eustace is unable to explain what happened to him, partly because he can't speak and partly because he doesn't know how to tell a story. He keeps trying to write in the sand with his claws, but between his swishing tail and the waves coming up the beach, the words get washed away before he can finish.
Everyone notices that Eustace is a more helpful person now that he's been turned into a dragon. He helps with the rebuilding and provisioning of the ship by surveying the island, hunting for wild goats and swine, and uprooting a huge tree that they can use as a new mast. When it's rainy and cold, everyone sits against Eustace's hot dragon flanks and dries off. He lights fires by breathing on the firewood and he takes some of the other adventurers for rides through the air.
Eustace enjoys making friends and being a useful member of the party. However, he hates being a dragon. He is horrified and disgusted by his reflection in the water.
When Eustace isn't needed as a giant hot water bottle, he creeps away and lies by himself near the camp. When this happens, Reepicheep comes and comforts him, telling stories of other adventurers who had terrible things happen to them but who ended up living happily ever after.
As the repairs and preparations of the ship near completion, everyone starts to wonder what they will do with Eustace when they need to leave the island. When they think he's not listening, they talk about plans for fitting him onto the ship, and they worry about how they'll feed him.
Eustace, overhearing some of the comments, realizes that he is a nuisance – and that he has been since he first came on board the Dawn Treader.
Six days after they first landed on the island, Edmund wakes up in the very early morning and sees a human figure walking toward him through the woods. He draws his sword and goes to meet the stranger, but it turns out that no fight is necessary – it's Eustace, who is human again!
Eustace seems unwell. He asks Edmund to take a walk with him so that they can have a talk before Eustace has to see everybody else.
Edmund and Eustace go and sit on some rocks overlooking the bay. They watch the sunrise. Eustace says he wants to tell Edmund how he stopped being a dragon.
He begins his story:
Last night, Eustace says, he was miserable. The bracelet was cutting into his arm.
Edmund interrupts and asks if that's OK now. Eustace laughs and takes the bracelet off, saying that anyone can have it.
Eustace says he was lying awake last night wondering what would happen to him. He saw a huge lion coming toward him, lit by mysterious light. He felt great fear.
The lion walked right up to Eustace (who was still a dragon at this point) and looked him straight in the eyes. Eustace shut his eyes, but the lion, without speaking aloud, told him to follow it.
Eustace followed the lion into the woods for a long way. Eventually they came to the top of a mountain he had never seen before, even though he had flown all over the island. On the mountaintop was a garden with fruit trees and a well.
Eustace describes the well, which he says was like an enormous bathtub or pool and had water bubbling up from the bottom.
Eustace knew suddenly that if he could bathe in the well, the pain in his leg caused by the too-tight bracelet would go away. The lion told Eustace that he would have to undress before bathing.
Eustace realized that the lion meant he had to shed his skin like a snake. He scratched himself all over and his skin peeled off. He stepped out of it, feeling renewed, and started to get in the water.
As he looked down at his feet to step into the well, he realized that he was still just as wrinkled, scaly, and hard as before. He tore off another layer of skin and stepped out again.
For the second time, Eustace started to get into the well, but once again he saw that his skin was too rough and scaly. He peeled off a third skin, but it still wasn't enough.
The lion told Eustace that it would help him. Eustace lay down on his back and let the lion tear off all the layers of his dragonish exterior. He says it hurt a lot, but that it also felt good to have it peeled off.
Eustace stepped out of a thick, dark skin and felt smooth, soft, and tender all over. The lion picked him up and tossed him into the water. At first it hurt, but then it felt wonderful. Eustace noticed that the pain in his arm was gone and realized he had turned back into a boy.
After a while, Eustace says, the lion took him out of the water and dressed him in regular clothes somehow. Then, all of a sudden, he was back in the woods by the beach, walking up to Edmund.
That's the end of Eustace's story. He wonders if it was a dream, and Edmund says it wasn't – Eustace has seen Aslan!
Eustace apologizes to Edmund for his behavior so far during the voyage. Edmund forgives him and admits that he himself was a traitor on his first trip to Narnia.
Eustace asks Edmund about Aslan. Edmund explains that Aslan is the great Lion, son of the Emperor over Sea, who protects Narnia.
For a long time, Eustace and Edmund sit quietly together. They can see the sky turning pink as the sun rises. Soon they hear noises from the camp as everyone else gets up and gets going for the day.
Everyone is thrilled when they find out that Eustace is back to his human self. He tells them all how he turned into a dragon. They wonder whether the old dragon killed Octesian or was Octesian.
A few days later the Dawn Treader is ready to sail. Caspian has an inscription carved on the cliffs naming the island Dragon Island and recording his discovery of it and Lord Octesian's death.
From this time on, Eustace begins to be a different person. He's not perfect, and sometimes he's still a jerk, but this experience has changed him.
Eustace doesn't want the bracelet. Caspian offers it to Lucy, but she doesn't want it either. Caspian throws it in the air and says that whoever catches it can have it. But it catches on a projection of rock and remains hanging above the bay.