Long ago, the humans and cats of Ulthar, city of cats, were struck by a great tragedy. For generations, the souls of those who were at the center of this tragedy have been sealed away by the king of cats. Chise and Elias travel to Ulthar in order to complete Simon's second task: to purify the spirits that remain.

To sorcerer Refnred's eyes, Chise is a sad girl, being duped by a mage. But no matter what Elias' true motives are, Chise has no intention of leaving him. Elias was the first person to value her, after all. As she walks towards the epicenter, she learns of the truth behind it. The sight of a boy appears behind the tragedy.

Chise and Selkie climb aboard a dragon's back to meet Lindel, to have her own mage's staff made. Frustrated by Chise's acceptance of her being kept as a pet by Elias, he describes the time he found Elias in the darkness. Meanwhile, Elias, who had stayed at home by himself, receives a letter from a sorcerer's college.

Chise and Elias are in the middle of shearing Wooly Bugs, magical creatures who eat cold from the air and grow wool with magical properties. Chise becomes distracted and is attacked. As Chise recovers, she and Elias open themselves up to each other more.

With Chise being transformed into a fox, she takes off running into the woods. Elias chases after her. Later, Chise is visited by the Leanan sídhe, who is attached to Joel, claiming that Joel will not wake up.

Christmas is coming up. Alice invites Chise out to London, where they hang out together and go gift shopping for Renfred and Elias.

In the land of dragons two young dragons are kidnapped from Lindel by Cartaphilius. Chise awakens from a dark dream to find, Alice, Renfred, Adolf and college administrator Tory Innis in Elias’ home. They explain Cartaphilius stole the two dragons using a teleportation device he stole from Renfred and want Elias to find the dragons and take them home

As the dragon rampages, Elias tells Chise they must absorb the dragon’s magic in order to stop it. This leaves Chise in a predicament as Elias becomes unable to help.

Elias and Chise attend Mariel’s coven meeting and meet Phyllis, Mariel’s high priestess. Secretly, Elias is given information that could help Chise. Following the meeting, Chise becomes suspicious of Elias' activities.

Elias earns the help of many, and they form a search party for Chise. Meanwhile, Chise and Cartaphilus relive his past together.

Cartaphilus and Chise argue over their respective approaches to dealing with their own suffering, beating each other up brutally in the process.