The next morning, when Harry wakes up, he tells himself that it was all a dream about a giant arriving and revealing that he was a wizard. He hears a tapping and thinks it's his aunt. He wishes the dream were real, opens his eyes, and finds himself in the desolate room with Hagrid.
An owl arrives carrying a newspaper; it drops off the newspaper and starts pecking at Hagrid's coat.
Hagrid tells Harry the owl needs to be paid and to give it money from the coat's pockets. Harry finds wizarding money and pays in Knuts.
Hagrid says that they have to get going to buy Harry's school supplies, and Harry gets worried about not having enough money for school, especially since Mr. Dursley said he wouldn't finance it.
Hagrid reassures Harry, telling him that his parents left him money. It's all kept safe in the Gringotts bank. This is a goblin bank, and Hagrid says Gringotts and Hogwarts are the most secure places in the world. Dumbledore's given Hagrid a task to accomplish there.
Harry and Hagrid leave the hut, and get in the dilapidated boat the Dursleys rowed over in. Hagrid admits he flew there, but isn't really supposed to be doing magic. They agree to keep it a secret if Hagrid helps the boat go a little faster.
On their boat ride, Hagrid tells Harry that the bank is protected by spells and dragons. Hagrid also explains about the Ministry of Magic – its primary purpose is to keep wizardry and magic secret.
After they make it to shore, they get a lot of weird looks as they go to catch a train to London. Hagrid confesses he'd like a dragon of his own.
On the train, Harry reviews the list of supplies. He'll need a uniform, including robes, a hat, and cloak, and several textbooks. He'll also need a wand and some other magic stuff.
When they get to London, Harry's still a little confused about how they'll be able to buy these supplies, but Hagrid knows where to go. Harry's worried until they get to a pub called the Leaky Cauldron. He realizes that it doesn't seem as though anyone else can see it at all.
Inside when Harry and Hagrid walk in, everyone stops and stares. They welcome Harry and every single person wants to shake his hand.
One of the people Harry meets is Professor Quirrell. Quirrell has a terrible stutter and seems super frightened. He's the new Defense Against the Dark Arts professor.
Finally, Hagrid extracts them, saying they need to go shopping, and they go into the alley behind the Leaky Cauldron. He explains to Harry that Quirrell is super smart, but hasn't been the same since he did fieldwork and had some bad experiences.
Hagrid taps on a brick wall, which opens, and the two go through it into Diagon Alley as the wall closes behind them.
They pass an interesting-looking Cauldron shop, but Hagrid says they need to get Harry some cash before they can do any damage. They walk past an Owl Emporium, a broomstick store, and some other interesting stuff before they get to the bank.
They walk under door with a poem inscribed on it that warns against stealing.
Inside, goblins are everywhere, working.
Hagrid produces a key (after much searching) to Harry's safe and a letter from Dumbledore about getting something out of a specific vault.
The goblin Griphook is summoned to lead Harry and Hagrid inside the bank. Hagrid says he absolutely can't reveal what Dumbledore's sent him to the bank to get.
They get in a railway cart; it takes them through a bunch of underground passages and also past an underground lake.
Harry's vault is full of magic money. He realizes the Dursleys couldn't have known about it. Hagrid helps him pick some out, Galleons, Sickles, and Knuts.
Then they go to the other vault, passing over a ravine. This vault unlocks by goblin touch. It's empty except for a small parcel, which Hagrid scoops up. They go back upstairs and out of the bank.
Harry's kind of overwhelmed by how much money he has. Hagrid's feeling sick from riding in the goblin railway cart. He goes back to the Leaky Cauldron for a drink and sends Harry to Madame Malkin's robe shop.
Madame Malkin helps him get fitted into Hogwarts robes next to another boy also going to Hogwarts. The boy makes Harry think of Dudley; he talks about his parents and having a broom, then mentions Quidditch and the different Houses at Hogwarts. Harry doesn't know what he's talking about.
Hagrid appears outside and the boy criticizes him. Harry stands up for him, and the boy asks about his parents. When Harry says they're dead, the boy doesn't seem apologetic, but just asks if they were "[their] kind." He says Hogwarts should be kept for wizarding races and asks Harry his name. Before Harry can answer, Madame Malkin says he's done.
Hagrid brings Harry ice cream. They shop for quills while Harry asks Hagrid about Quidditch. Hagrid says it's difficult to say what it is, but it's similar to football played with broomsticks. And extra balls.
Hagrid says there are four houses at Hogwarts, including Hufflepuff and Slytherin, and that You-Know-Who was a Slytherin.
They go to Flourish and Blotts to buy his books. Hagrid reminds Harry you're not supposed to work magic around Muggles. Then they buy cauldrons and scales, and they also go to the Apothecary's.
Hagrid tells Harry he'll get him an Owl for a birthday present. Harry's overwhelmed and gets a lovely snowy owl.
Then they go to Ollivanders for his wand.
The wand shop is tiny and seems extra magical. Mr. Ollivander remembers Harry's parents and the kinds of wands they chose. He knows the wand that caused Harry's scar, and he remembers the wand he sold to Hagrid – which shouldn't be used any more, since Hagrid was expelled. (But it might be in Hagrid's umbrella.)
Mr. Ollivander measures Harry all over, and then Harry tries a bunch of different wands. None of them seem to work. Finally he tries one made of holly and phoenix feather, which feels magical in his hand.
Mr. Ollivander calls it "curious," though, and says that it's linked to the wand that caused Harry's scar. He says that Harry may do great things. Harry's kind of creeped out by this, but they pay and leave.
They go back to the Leaky Cauldron and then into regular, non-magic London. They get a snack before Harry's train comes. Harry thinks it was a great birthday, but is also worried. People are treating him like he's "special" and famous, but he doesn't understand any of it.
Hagrid reassures him, saying he'll learn and figure it all out at Hogwarts; then, he puts him on a train back to the Dursleys', and says he'll see him on September 1st for the start of term at Hogwarts.