The men of Lake-town—two nights previous—are watching the mountain and seeing lights flickering on the peak of the Lonely Mountain. There is a brief argument of whether it is the dwarves forging gold or the dragon spouting flames. Then they see the water turn golden, and people begin to think the stories of the river running with gold are coming true. But one man rushes to the Master and tells him the dragon is coming and people should get to arms. Warning bells sound and the cheers turn dread, but the people are not wholly unprepared for the coming of the dragon (258–259).
And the town prepares by filling every vessel with water and fitting every bow with an arrow. The bridge to land is torn down to give the dragon no place to light, for he cannot light in the water. Then the battle ensues between the arrows and the dragon’s fire, with Bard (the man who warned the Master) urging his fellow towns-people on (259–260).
Men begin to jump into the water in fear. Women and children are being put in boats. Even the Master tries to desert secretly as the the town is slowly burned and destroyed by the enraged dragon. The dragon is enjoying the sport and hoping more make it into boats and try for land as he will enjoy pursuing them later. But in the meantime, a group of archers hold their ground, led by Bard. And as Bard is about to let his last arrow loose, the thrush lands on his shoulder. The thrush tells him of the weak spot in the dragon, and Bard understands him because he is descended of the race of Dale. He fires the arrow, and it hits its mark, and the dragon comes crashing down on the town (260–262).
While people lament, the narrator reminds us that it could have been much worse. Three quarters have survived as have all their fields and pastures and cattle. And the dragon is dead, though no one really understands exactly what that means yet—how could you in the midst of such a tragedy! The people on the shore begin to complain that the Master had tried to leave early, and they lament the loss of Bard, when he suddenly appears. They want to proclaim him king, but the Master protests that this is not the way things are done in Esgaroth. The Master says that if Bard wants to be king he can go back to the ruins of Dale and rebuild and any can go if they wish, but that he won’t be king there. The people refuse to listen and still try to proclaim him king. The Master then seeks to turn the blame from himself to the dwarves. Bard then thinks of the unguarded treasure and pledges his current loyalty to the Master (leaving open his future plans) and says there is much to do still this night (262–265).
While the Master desires to be waited on, Bard takes the lead to try to bring order, though many would perish from cold and wet. Bard also sends for help from the Elven king. Without Bard’s management, many more would have perished that winter. The Elven king had already heard the news from his own messengers. The birds are out in force heralding the death of Smaug. The news even spreads beyond Mirkwood to Beorn and the goblins. When Bard’s messengers find the king, he is already marching to the mountain, but he turns aside to assist the people. While some stay behind to rebuild the town, many men and elves prepare to march toward the mountain (265–267).