The next morning, Bard and the Elvenking come to the mountain’s entrance with a cloaked old man. They ask Thorin if he would be willing to trade for some of his gold, and they show him the Arkenstone. Thorin is appalled that his enemies have the stone, and he says he should not have to buy back what is his own. He accuses them of stealing, but Bilbo admits that he gave Bard the stone. Thorin shakes Bilbo, cursing him and Gandalf for choosing him, and he threatens to throw the little hobbit onto the rocks below.

The old man beside Bard and the Elvenking throws off his cloak and reveals himself to be Gandalf. He tells Thorin to make a deal and to refrain from hurting Bilbo. Furious, Thorin calls Bilbo “descendant of rats” and demands that he explain himself. Bilbo answers that he took the Arkenstone as his fourteenth of the treasure and that it was his own property to give. Thorin declares that he will consider Bilbo an enemy forever and tells him to leave as a traitor. However, he promises to send a fourteenth of the gold and silver tomorrow in exchange for the Arkenstone. The other dwarves watch sadly as Bilbo goes, but Thorin does not regret losing him. He plots how to get the Arkenstone back without having to give up any of the treasure.

The next day, Dain arrives in the valley with his force of five hundred strong, armed dwarves. He demands to be allowed to pass by the forces of men and elves so he can join his cousin in the Lonely Mountain. Bard and the Elvenking refuse. They know that, once joined, the dwarves will likely refuse to give up any of their treasure. The dwarves are on the point of attacking when Gandalf appears between the two sides and calls them to a halt. He informs them that an army of goblins and Wargs is approaching, hoping to take control of the Lonely Mountain.

At this news, the men, elves, and dwarves join forces and stand together to fight the goblins. The battle that follows is known as the Battle of the Five Armies, and Bilbo hates it most of all his terrifying experiences. However, it is by far the most exciting—and so it is the story he most likes to tell afterward, when he is safe at home. In truth, he is insignificant in the battle, and he wears his ring most of the time to stay invisible. A magic ring cannot protect a person from being injured by flying arrows or spears, but it “prevents your head from being specially chosen for a sweeping stroke” by a sword or axe.

The battle rages long and hard, and the heroes of the men, dwarves, and elves all fight mightily. At one point it seems that the goblins are defeated, but then a group of them swarms in ambush over the back of the Lonely Mountain. Then it seems that the men, elves, and dwarves are defeated, but at the last moment Bilbo spots help on its way. “The Eagles are coming!” he cries as a group of huge birds approaches. At that moment, a rock falls from above and knocks him unconscious.