While the young people celebrate, the Clan Chieftains meet in council on the Azure Mountain. They are concerned because the prophetic writings kept in the Sacred Grove on the mountainside predict calamity. Lielvardis arrives and reveals that the German knights have captured a number of Latvian stockades and built their own stone castles, and are imposing Christianity at the point of the sword. His own fortress, Lielvarde, has been seized. Bishop Albert is bringing more knights from Germany to take over all Latvia. At this moment Bearslayer appears, together with Koknesis, Laimdota and Spidala. Bearslayer is elected leader of the Latvian warriors. All pledge themselves to fight to free their land, and return to their homes to prepare for war.
Bearslayer and Laimdota, as well as Koknesis and Spidala, are married at the Castle of Burtnieks, Laimdota's home. There is a great wedding celebration, but this is cut short by Burtnieks, who tells them that they will soon be at war. The new couples have little time for wedded bliss before the men have to set off to fight the German invaders, and Laimdota and Spidala, refusing to be separated so soon from their new hus- bands, set off with them. The Latvian host gathers and marches on Turaida. On the way, they eliminate German infestation whenever they encounter it.
Alarmed by the Latvian uprising, many Germans have fled to Turaida and taken refuge in the stone castle built there by the Germans. The Latvians lay siege to the castle, and eventually are able to scale the walls at night and fight on the ramparts. A fearful battle ensues, with heavy losses on both sides. Bearslayer kills many Germans and, realizing that he is too strong for them, the Germans surrender. Among those captured is Dietrich, who is handed over to the locals for punishment. However, he tricks them into setting him free. They now march on Lielvarde, Bearslayer's home, where the German knight, Daniel, has built a stone castle. Just before they arrive, Daniel invites the chieftains of some Latvian clans that had fled into the forest to a parley. However, once he has them in a great pavilion he locks them in and sets fire to it. The elders cry for help as Daniel and his men watch in glee from the castle walls.
In the nick of time Bearslayer arrives with his army. He rescues the chieftains and attacks the German castle. The Germans fight hard but are defeated, and all except Daniel are slaughtered. He is handed to the local people for punishment, and they throw him into the Daugava tied to a plank. Bearslayer re-establishes himself at Lielvarde
Meanwhile, Albert has returned to Germany to recruit more knights. He leaves Kaupa in charge in Riga, to where most Germans have now retreated. All seems well for the Latvians, and Bearslayer and Laimdota settle down to married life together. The others too return to their homes, thinking to live out their lives in peace.
Springtime comes, and the Latvians have little thought of war. Even Kangars is working in his garden. His life is bitter: He receives no honour from any one, any more. He knows that death will bring him the torments of Hell, while his remaining days of life are wracked with the knowledge of his own wickedness. One day Dietrich comes to him and asks him to communicate with evil spirits to discover the source of Bearslayer's strength. Kangars says that it is no concern of his that Bearslayer is killing Germans, but that he has his own reasons for wanting to destroy the young man. He wrestles with demons for three days and nights without sleep, and they reveal to him the secret of Bearslayer's strength-his bear's ears.
Among the new knights brought back from Germany by Albert is the Black Knight. He is already experienced in doing wicked deeds in Germany. He claims to be the son of a witch and immune to harm from wounds. One day Kaupa takes a party of knights, including the Black Knight, to Lielvarde, and asks for admission, saying that he wishes to make peace between the Latvians and Albert. Bearslayer wants peace and the Germans are admitted. They are treated well, and Bearslayer organizes a tournament to entertain them.
In the tournament, both Bearslayer and the Black Knight defeat their opponents, and the Black Knight suggests that they fight each other. Bearslayer refuses, although he does not want to insult the Black Knight. The Black Knight then says that it would hardly be a test of his strength to fight Bearslayer, any way, despite all Bearslayer's boasting. Stung by this, Bearslayer seizes his sword and the two fight.
At first Bearslayer thinks that it is mere sport, but the Black Knight fights with great vigour, and suddenly cuts off one of Bearslayer's ears. Enraged, Bearslayer now attacks in earnest, and with a terrible blow of his sword splits open the Black Knight's armour and wounds him. However, his sword breaks. Seeing this, the Black Knight attacks again, and cuts off Bearslayer's other ear.
Terribly angry, Bearslayer seizes the Black Knight and they wrestle together. In their fight they stumble to the very edge of the high cliffs above the River Daugava. Bearslayer's men look on, grown pale with apprehension and rooted to the spot with fear. Three times Bearslayer lifts up the Black Knight, but each time the German kicks free. Finally, Bearslayer throws him over the cliff into the river's depths, but the Black Knight drags Bearslayer with him. Weighed down by the knight's heavy armour, they sink to the bottom. At this moment the waves roar and an island rises up in the river. In the castle, Laimdota, who had had a premonition of disaster, shrieks and ends her own life.