Almost a year has passed since Bruno and his family moved to Out-With. Grandmother dies, and the family must return to Berlin for her funeral. Bruno had missed his home acutely when they first had to relocate, but in the intervening time, his memories of life in Berlin have slowly faded, and the two days they spend back home are very sad. Father is particularly remorseful because he and Grandmother had fought before she died and never made it up. Although he is very proud that one of the wreaths sent in her honor is from the Fury himself, Mother says that “Grandmother would turn in her grave if she knew it was there.”

When Bruno returns to Out-With, he finds that the house there has now become his home. Bruno realizes that things have improved markedly since they first came. For one thing, after much arguing between Mother and Father, Lieutenant Kotler has been transferred away. Gretel, of course, is inconsolable, but she is experiencing changes that result in her new tendency to leave Bruno completely alone. With the lieutenant’s departure, Gretel has decided she is too old to play with dolls and instead has adorned her room with huge maps of Europe that she studies constantly, moving pins around on them daily after consulting the newspaper.

The best thing about Out-With in Bruno’s estimation is “that he [has] a friend called Shmuel.” Bruno continues to visit Shmuel regularly, and he reflects on the strangeness of the arrangement because they never get to play together. Bruno begins to think more and more “about the two sides of the fence and the reason it [is] there in the first place.” Unable to understand why things are the way they are, he decides to consult Gretel about the phenomenon.

Gretel is experimenting with her hair when Bruno enters her room, and when he asks her about the situation at Out-With, she immediately interrupts him, telling him he is not saying the name of the place properly. Although she pronounces it correctly for him, he cannot tell the difference. He inquires about the fence and why it is there. Gretel, unable to believe that her brother is “perfectly serious,” at first laughs at him and then explains that the people on the other side of the fence, who are called Jews, must be kept together “with their own kind.” When Bruno asks, in all sincerity, what they are on this side of the fence, in contrast to the Jews, Gretel cannot give a good explanation other than to say that they are “the opposite.”

Bruno persists, asking with perfect reasonableness why the Opposite and the Jews do not get along, but Gretel does not answer, because she has found “something unusual” in her hair and is examining it carefully. When she discovers that it is a tiny egg, she screams in horror and Mother runs into the room. As it turns out, both Gretel and Bruno have lice in their hair. Gretel must be treated with a special shampoo, and Father shaves Bruno’s hair off completely. When Bruno sees himself with his bald head and his “eyes . . . too big for his face,” it occurs to him that he looks just like Shmuel.