While Eustace is discovering that he's lost, everyone else is back on the beach, washing up in the river and getting ready for dinner. They're preparing to feast on roast wild goat and wine. While everyone is eating a second helping, Edmund wonders aloud where Eustace is.
Meanwhile, in the unknown valley, Eustace notices burned, blackened patches of the landscape and a small pool nearby. It's completely silent – there are no birds or insects or animals around. (Cue the creepy music!)
Eustace realizes he came down the wrong side of the cliff and turns around to head back. But when he looks behind him, the fog has cleared and he can see just how steep, narrow, and dangerous the path is. He can't bring himself to go back up that way.
He starts to go get a drink from the pool, but then he hears a weird noise. He looks around for the source of the noise and sees a cave with two streams of smoke pouring out of it. He can hear something crawling around on the loose stones.
As the creature comes out of the cave, Eustace is horrified. He doesn't recognize it because he's never ready any fantasy books, but the narrator tells us that it's a dragon.
The dragon doesn't attack Eustace. Instead, it moves very slowly toward the pool. Eustace starts to realize that it's old and sad.
Before the dragon can drink from the pool, it keels over and dies.
Eustace waits for a long time, worried that the dragon is just playing dead to lure him over to it. Eventually he decides to check it out. He goes over and touches it – it's definitely dead.
Eustace feels relieved and elated. As he starts to drink from the pool, a thunderstorm suddenly breaks. The rain is heavy and hard, and Eustace is forced to take shelter in the dragon's cave.
Because he's never read anything about dragons, Eustace is surprised to discover that the cave is full of treasure. He finds himself lying on gold coins, rings, cups, plates, gems, and other precious things.
Eustace realizes that, with a fortune in treasure, he can live very well in the world of Narnia. He thinks about going to Calormen, the country that was buying the slaves from the Lone Islands.
Eustace starts to load himself up with as much treasure as he can carry. He fills his pockets with diamonds. He slides a large bracelet over his arm and pushes it above his elbow so it will stay on.
While Eustace waits for the rain to stop, he falls asleep.
Meanwhile, the others on the beach are calling for Eustace and starting to worry about him. Lucy speculates that he might be lost or hurt or killed. Rhince says good riddance, but Reepicheep reminds him that, as Queen Lucy and King Edmund's relative, Eustace is worthy of their protection. Caspian says they'll have to put together a search party.
Eustace is woken at night by a pain in his arm. He thinks the bracelet he put on his left arm has shrunk.
Eustace moves his right arm to feel his left, but in the moonlight he sees a dragon's claw moving on the right side of him. He realizes the dragon must have had a mate, which is now lying beside him. Two streams of smoke are pouring through the cave.
For a few moments Eustace is frozen with fear. He holds his breath and the smoke in the cave stops. When he starts breathing again, the smoke starts again.
Eustace starts to creep to the left but sees the dragon's other claw on that side too. He starts to cry, but his tears are strangely large and steamy.
As Eustace tries to creep out from between the two dragons, he sees their legs move whenever he moves his arms. He panics and bolts out of the cave, rushing toward the pool of water.
When he gets to the pool, Eustace notices two things. For some reason, he's been running on all fours. And when he looks at his reflection in the water, there's a dragon looking back at him.
Eustace realizes that he has been turned into a dragon while he slept. He was lying in a dragon's cave, on a dragon's hoard of treasure, thinking greedy dragonish thoughts, and so he became one. He now understands that the "two dragons" on either side of him were just his own dragon arms. His arm hurts because the bracelet he put on is now too small for his dragon foreleg and is biting deeply into his flesh.
For a moment, Eustace feels relieved. He has nothing to be afraid of – he is the monster!
But then he realizes that he wants to be a human being, to have friends and be around other people. He starts to cry.
After a while Eustace decides to go back to the beach and try to make Caspian and the others understand what has happened to him.
Eustace drinks from the pool and, without thinking, eats most of the dead dragon.
He starts to climb out of the valley, but then discovers that he has wings. He is thrilled to find himself flying over the mountains in the moonlight. He sees the Dawn Treader and begins diving toward it.
Lucy has fallen asleep after waiting to hear the report of the search party. They couldn't find Eustace but they did see the dead dragon in the valley.
Lucy is woken later in the night. Caspian is explaining to everyone that they saw a dragon fly over the trees and land on the beach, between them and the ship. He says they will have to wait for morning to fight it.
The adventurers wait until dawn. They try to eat a small meal to keep their strength up, but nobody is hungry. Everyone waits, feeling doomed, for the morning and the fight with the dragon.
Eventually Caspian gives the order, and they prepare to face the dragon. All the men draw their swords and form into a group, with Lucy in the middle. They march down to the beach and meet the dragon.
As they advance on the dragon, it retreats into the shallow water behind it and shakes its head.
Lucy notices that the dragon is crying. Drinian is suspicious and says the tears might be a trick. The dragon shakes its head, as if to say "no."
The adventurers realize that the dragon can understand them. Reepicheep steps forward and asks the dragon if it can speak. It shakes its head "no."
Reepicheep asks the dragon to raise its left leg if it wants to swear that it is friendly to them. It does, but it's clumsy because of the golden bracelet cutting into its leg.
Lucy runs toward the dragon without thinking and offers to heal its leg with her magic cordial. The cordial helps ease the pain, but it can't dissolve the gold bracelet.
Caspian, staring at the bracelet, notices something.