The next morning, Charlie notes Charlotte looks pale and tired. She tries to speak with him privately, but he refuses. Having already tried to call the police only to be dismissed when he mentioned a witch, he resolves to guard Jack personally. In the car, Charlie crowds his brother so aggressively that Andrew tells him to stop. When their father announces that Charlotte will pick Jack up after school that afternoon, Charlie tries to claim Jack has plans with him, but Andrew insists.

At school, Charlie spots Principal Stearns questioning Jack in the hallway about Charlotte’s stories. Charlie interrupts and invents a plot about a foul-smelling princess to make Charlotte’s writing sound unappealing, and the principal loses interest and leaves. Furious, Jack kicks Charlie in the shin and says he no longer wants him as a brother. Teachers and the principal hover near Charlie for the rest of the day whenever he tries to speak with his friends. Just before the final bell, he manages to tell Paige to gather the others outside after school.

Charlotte arrives looking ordinary and cheerful and invites Charlie and his friends to join her and Jack for ice cream. Charlie fabricates a prior obligation and tries to take Jack with him, but Jack refuses and goes with Charlotte. When Charlie snaps at Charlotte and calls her a witch in front of everyone, she deflects by swinging a laughing Jack over her shoulder and heading off. Charlie’s friends pull him away and insist he explain everything at their secret gathering spot, the bunker.

The bunker is a hollow space beneath a giant pine near the town’s library. The four friends have two rules about their secret hideout: Only the truth may be spoken inside, and nothing said there can be repeated. Charlie tells his friends he believes Charlotte is a witch cooperating with the nightmare witch, who plans to eat Jack. Rocco admits he’s been having his own nightmares featuring a figure he suspects is Principal Stearns keeping him trapped in seventh grade forever. Alfie adds that he has bad dreams of Stearns forcing him through a fitness exam he can never pass. Charlie explains that sleeping spirits can travel to the Netherworld and describes the previous night’s waking confrontation with the witch. Alfie remains skeptical but is unsettled.

The group decides on a surveillance mission to the ice cream parlor and Hazel’s Herbarium, which sit side by side two blocks away from the library. Rocco scouts both windows and signals urgently from the herbarium. Inside, the group watches Jack and Charlotte sharing ice cream and laughing. Paige tells Charlie gently that Charlotte doesn’t look like a witch. His friends, satisfied that Jack is safe, ask to go get ice cream. Feeling defeated, Charlie tells them to do whatever they want and walks home alone.

Charlie arrives at the empty house, intending to search Charlotte’s tower studio for proof she’s dangerous. He hears a crash from above followed by heavy footsteps, then silence. He goes up and finds the room ransacked. A desk drawer has been broken open, and Charlotte’s drawings are scattered across the floor. Among them is a picture of the family’s house rendered entirely in black, captioned “The Netherworld Mansion,” which he pockets as evidence the Netherworld is real. He also finds a drawing of his mother as a small girl standing her ground against a clown. A poem on the back instructs the reader to recognize they’re dreaming and understand that nightmares are fears in disguise. Before Charlie can think further, Jack and Charlotte return. He stuffs the drawings back into the binder, shoves it in the drawer, and ducks under the desk just as Jack enters. Hidden in the warmth beneath it, Charlie drifts off.

In the nightmare, he’s in the witch’s dungeon. He overturns the cauldron onto her, but she survives and mocks him for thinking that she would melt. Agatha blurts out that they plan to eat Jack. The witch and cat tie Charlie to the cot and leave. He forces himself awake to find it is now night. Slipping downstairs, he overhears his father reporting him missing to the police. Then he hears the tower door creak shut and footsteps climbing the stairs. Rushing back up, Charlie finds one wall of the tower has dissolved, replaced by the dark forest from his nightmares. In the distance, the witch is running through the trees with a small, bound figure over her shoulder. Charlie follows her.

Charlie chases the witch into the Netherworld forest but quickly loses her in the darkness. He wades through foul-smelling mud, losing his shoes to brambles and mire. He stops, bleeding, lost, and sensing something watching him. Knowing he can’t leave without Jack, he presses on.

A swarm of giant carrion beetles seems to guide him through the forest until he reaches a cottage perched high in the treetops. Agatha appears on the porch and tells him that Jack needs to be fattened before she and the witch eat him. She also reveals that, unlike Charlie’s previous dream visits, his body has physically crossed through the portal this time, which means he’s trapped in the Netherworld. She adds that a “very important gentleman” has been waiting to meet him. Charlie recognizes the cottage as the walking, chicken-legged hut from a folk tale that frightened him when he was little. The house begins chasing him.

Before the hut can crush him, an enormous clown driving a rusted yellow convertible careens through the trees and lassoes the cottage’s legs. Agatha screams at the clown, who’s named Dabney, and Charlie recognizes him from Charlotte’s illustrations. Dabney urges Charlie to take the car and escape. The cottage seizes the clown, but Dabney shouts that nightmares like him never die, and Charlie speeds away.

Driving Dabney’s car, Charlie passes through other people’s nightmares. He sees gargoyle-patrolled castles, wolf-chased roads, and a volcanic landscape with dinosaurs but finds no sign of Jack or the witch’s tower. The car, a large wind-up toy, finally stalls in a ruined version of Cypress Creek. A polished voice from a sewer grate warns him that eyeless, razor-toothed rabbits are approaching. Charlie drops in and meets Meduso, a neatly dressed, snobbish gorgon who wears dark sunglasses to keep from turning people into stone. Meduso lifts his hat to reveal three snakes growing from his head, Larry, Barry, and Fernando. Fernando is sympathetic toward Charlie, Larry is irritable, and Barry is silent.

Meduso explains he was sent to help Charlie return to the portal inside the mansion, which is the only passage between the Netherworld and the Waking World. Charlie refuses to leave without Jack. After the boy describes the witch, the trap, and the unnamed gentleman behind it all, Meduso and his snakes grow visibly alarmed and reluctantly agree to help. They travel through the sewer and emerge in Charlie’s personal nightmare territory. A long black hearse that Meduso identifies as “a Netherworld limousine” passes through the forest (158), and the gorgon forces Charlie to hide. Fernando reveals the passenger is the powerful figure who wants to meet Charlie. Believing that person knows where Jack is, Charlie steps out onto the road.

Charlie follows the limousine to a stadium. He and Meduso climb a tree to watch as a nine-foot-tall man in a black suit emerges. Meduso identifies him as President Fear, the self-appointed ruler of the Netherworld. The president hauls a bound boy from the trunk. The stadium is a full replica of the Colosseum, packed with a crowd of spectators and dozens of goblins who throw rotten meat onto the arena floor.

Charlie and Meduso slip inside the arena. When Charlie gets a clear look at the captive below, he recognizes him as Alfie. Meduso explains that fear is contagious and that Charlie’s unresolved nightmares likely spread to his friends, making him responsible for Alfie being there. When President Fear addresses the crowd, Charlie recognizes his voice and realizes that he’s Principal Stearns. Meduso dismisses the idea until Charlie points out that the witch has already crossed into the Waking World.

President Fear reveals that Alfie is failing gym, takes his glasses, and forces him to run before releasing a lion, a tiger, and a bear into his path. Charlie tells Meduso he’s going to help his friend. Meduso warns that Alfie must face his own fears or they’ll only worsen. Charlie refuses to stand by, and the animals in the arena give him a plan.