At long last Bilbo sees the trees end and the wide expanse of river as the land opens before him and there in front of his eyes is the Lonely Mountain. He is frightened by it and is very happy as the river turns and he no longer sees the Mountain.

The elves guide the rafts of barrels to the town built on Long Lake, which is where men are waiting for the barrels. The barrels are guided towards the village, that is built on long piles driven into the bed of the river and reached by a long bridge from the shore.

Once the barrels are moored at Lake-town, the elves and the men go into the town to enjoy a feast together. While they are feasting, Bilbo begins the tedious job of finding the dwarves in the barrels and releasing them. The dwarves are famished, bruised, and some are ill, but Thorin takes two along with Bilbo to the town. There he announces himself as "Thorin son of Thrain son of Thror King under the Mountain!" to the guards standing watch over the bridge. He demands to see the Master of the town.

The guards, after some confusion, obey his demand and bring him before the Master of the town. The Master does not really believe Thorin's claim and the elves tell the Master the dwarves are their escaped prisoners. But, before the Master can make a decision, the townspeople come together to rejoice in the return of the Dwarf King's grandson. The Master agrees to go along with the will of the people and for two weeks they host Thorin and the rest of the party.

After two weeks, Thorin decides it is time for them to continue their adventure and asks the Master for supplies and some men to aid in their quest.

Unknown to the party, Gandalf has heard of their problems and is making plans to come to their aid.

Thorin and the dwarves, along with Bilbo, row up the Long Lake and into the River Running. The Lonely Mountain looms over them making the trip a trepidatious one for all of them. They meet up with the men, who have gone on by land with the ponies and horses on the third day of the trip. They invite the men of Lake-town to stay the night with them, but they refuse to stay in an area so near the Mountain. They will not feel safe until Thorin has regained his lost treasure and home.

The little band continues on till they are at the base of the Mountain. They make a camp and look for first the Front Gate and then the secret door. The Front Gate is found easily, but the secret door takes much more time.

They search for days until one day Fili, Kili and Bilbo find a path which winds up the mountain to a small high bay, in which they can discern an area that does not look natural. This is the secret door. The dwarves, except for Bofur and Bombur, who stay to guard the camp, all climb the path and try to open the door. They are unsuccessful until Bilbo, after watching a bird crack open a snail, realizes the moon is right that night for the door to open. As the last vestiges of the sun hits the door it begins to crack and a key hole is revealed. Thorin uses the key, which came along with the map, to open the door. They all push the door open and reveal a large dark opening into the Mountain.

It is decided that Bilbo will enter the tunnel first, because he is the burglar. Bilbo using his ring to cloak him finds his way to the dragon and his treasure. He sneaks in and steals a cup and escapes to the waiting dwarves. He is received with great admiration by the dwarves, but the celebration is cut short, after they hear the bellowing and trampling of the dragon. He is enraged by the theft of the cup and is trying to find the thief. The group hides in the tunnels, leaving the door open just a crack.

Smaug flies over the Mountain looking for them, but he has to settle for eating their ponies. The next day they move back outside of the tunnels to discuss what they should do about Smaug. Bilbo offers to use the ring to see what the dragon is doing and they decide to accept his offer of help.

Bilbo doesn't realize the power of Smaug's sense of smell and is unprepared when Smaug addresses him, while he is invisible. He doesn't give the dragon his name, instead Bilbo talks in riddles about himself. Smaug tells Bilbo to stay away from the dwarves and questions how they will bring the treasure back home.

Bilbo is able to get Smaug to reveal his vulnerable spot on his underside of his chest. As Bilbo leaves Smaug he taunts him, which leads to the dragon breathing fire on him.

After returning to the men, Bilbo notices a thrush who seems to be listening to every word he says and this irritates him, he wants the bird to leave.

Bilbo feels unsafe on the bay in front of the secret door and convinces the others to shut the door and take refuge in the tunnel. This is good because a few minutes after they shut the door, Smaug attacks the bay and collapses it. He also lets Bilbo know he will attack the people living in Lake-town.

Bilbo and the others finally escape the elves and with the help of the people of Lake-town find their way to the Mountain. There they find the way into the Mountain and Bilbo has an encounter with Smaug. Bilbo is becoming the leader of the group, as the others look to him for answers and to give them courage to face the dragon.