Irritably asking what she's doing, Natsu tells Erza that he'll be the one that fights Laxus, prompting Erza to smile and ask if she can trust him with such a task. Ignoring Natsu's confusion, Erza runs out of the Kardia Cathedral; both Natsu and Laxus realize that she is going to attempt to stop Thunder Palace. Laughing at her, Laxus states that destroying one Lacrima holds the possibility of ending her life, and that as there are three hundred of them and time is running out, she has no chance. In response, Erza declares that she'll destroy all of them at once, though Laxus tells her that it's impossible and that even if she does somehow manage to do so, she will inevitably die. Erza replies that the town will be safe anyway. As she leaves, she yells to Natsu that he should make sure he stops Laxus; Natsu asks Erza whether or not he can trust her as well: not to destroy Thunder Palace, but to come back alive. Smiling at Natsu's comment, Erza mutters that she has no intention of throwing away the life that Natsu gave back to her.
Laxus attempts to go after Erza but Natsu blocks him with his Fire Dragon's Roar before attacking him once more with Fire Dragon's Brilliant Flame, though Laxus negates all this with his lightning. Laxus tells Natsu that even he must see the pitiable state that Fairy Tail is in, and that, as the lightning crackles around his body, he must become the Master to change that. Although Natsu dodges most of the lightning bolts, he is unable to maneuver past the last one, which send him flying into a pillar. Laxus then notices the runes on the wall state that only one and a half minutes remain until Thunder Palace is fired, prompting the man to ask what his grandfather is playing at; Natsu tells Laxus not to get worked up over something that won't happen, adding in that he's anxious because he wants to stop Thunder Palace himself but is unable to; Erza will take care of it. Natsu then starts charging towards Laxus, screaming that keeping up an act such as his isn't easy, prompting Laxus to charge back at Natsu, yelling that he shouldn't act so cocky. Natsu manages to kick Laxus in the face, telling him that nothing is going to happen, earning him a snide remark from the S-Class Mage.
Later, the runes state that Thunder Palace has been stopped, with each of the participating Fairy Tail members' number of Lacrima destroyed being shown. Seeing this, Natsu asks Laxus if he still thinks the guild needs to change, as they act like a family together, and someone who doesn't include themselves in the family wouldn't understand. Hearing this enrages Laxus, and through lightning the lightning coming out of his eyes and mouth, he states that he'll simply become the Master through force. Natsu replies by saying that he should give up, as Fairy Tail will never be his, to which Laxus states that it will always be his and that he should have used force to take it from the very beginning. Natsu charges forward, readying his Fire Dragon's Iron Fist, crying that he will crush Laxus' power so that his ambition will end, though the attack does nothing to him.
Laughing, Laxus tells Natsu that he'll be the first to fall; he yells that should Fairy Tail try to stop him, he'll just take everything thrown at him. With his Magic, he electrocutes Natsu, sending him flying, before tackling and kneeing the young Mage. Abusing Natsu's inability to retaliate, Laxus continues to beat the Fire Dragon Slayer, zapping with lightning in the process as well. With Natsu unable to get up and finally recognizing Laxus' power, Laxus starts gathering a massive amount of lightning and begins to chant: he casts Raging Bolt on the immobile Natsu. The spell strikes the ground where the Dragon Slayer is, revealing, after the clearing of the smoke, nothing to be in his place.
Maniacally laughing, Laxus asks Natsu who the strongest in the guild is now, though he counters his own statement by saying that he can't answer seeing as how there's nothing left of him. However, Laxus' emotional high is ruined by the entrance of Gajeel, with Natsu in hand, who states that Laxus must have something wrong with him if he finds joy in having almost killed a comrade; he adds that taking out Laxus is his job. Gajeel then proceeds to drop Natsu on the ground whilst Laxus laughs about having new prey, screaming that all those who stand before him will be reduced to nothing. Natsu struggles to get up and tells Gajeel that he'll handle Laxus, telling his fellow Dragon Slayer that he should stay back. Gajeel, however, replies that he has a personal vendetta against Laxus, though if he were to go up against him alone, then he will surely lose, as he is Makarov's grandson. Adding that they have no choice but to team up even if they don't like it, but Natsu outright refuses the idea.
Hearing this, Gajeel screams for Natsu to look at Laxus, asking the Fire Dragon Slayer if this Laxus resembles the one he knew; with a crazed expression, Laxus demands that they all disappear. With Natsu now aware of the graveness of the situation, Gajeel tells him that to save the guild, they must stop Laxus, though he adds that due to the destruction of Thunder Palace, everyone else in the guild is unable to fight, leading Natsu to realize what will happen if Laxus isn't stopped. Natsu incredulously asks him if he's protecting Fairy Tail, to which Gajeel replies that destroying it or protecting it are his choices. Smiling at his fellow Dragon Slayer, Natsu tells Gajeel that he thought that the sky didn't have enough room for two Dragons; Gajeel replies that there isn't, but with all the lightning crashing down he can't do as he pleases. With this, Natsu and Gajeel form their alliance with only one goal in mind: defeat Laxus.
Both Dragon Slayers then charge towards Laxus and attempt to strike him, but Laxus evades their attacks and blows Natsu away with his lightning. Gajeel orders him to use his Dragon's Roar; Natsu does so, using it to power up Gajeel's Iron Dragon's Club, though Laxus evades this as well. Turning his foot into the Iron Dragon's Sword, Gajeel attempts to hit Laxus once more, but in response, Laxus shoots balls of lightning at Gajeel, who is eventually hit by the attack. While Laxus is suspended mid-air, Natsu appears behind him and uses Fire Dragon's Brilliant Flame, which lands a direct hit. Using this opportunity, Gajeel assists by casting Iron Dragon's Lance: Demon Logs.
In perfect sync, both Dragon Slayer's attack with their Dragon Roars, managing to, once again, land a direct hit. However, Laxus rises from the smoke, unharmed, and asks the two if that's the best they can do; in shock, Gajeel wonders how someone can handle that much Dragon Slaying Magic. Laxus, with a smile, tells them that he was ordered to keep a secret by his grandfather, but that this one time only he'll divulge his information: Laxus bulks up, tearing his shirt. Reeling back his head, Laxus takes lightning into his mouth, causing Natsu and Gajeel to become stunned; Laxus fires his Lightning Dragon's Roar at the two, leaving them immobilized. Reaching his peak, Laxus exclaims that he will exterminate everyone: the two of them, Erza, Mystogan, Makarov and all of those in Magnolia Town and Fairy Tail before releasing a large amount of Magic Power, which is recognized to be the heralding of Fairy Law.
Natsu and Gajeel crawl on the ground and try to stop Laxus from unleashing the enemy-eliminating trump card. At just that moment, however, Levy McGarden appears at the doorway of the Kardia Cathedral and calls out to Laxus with tears in her eyes, telling him that Makarov is about to die, causing Laxus' eyes to momentarily widen. When Levy cries out that he should just stop and go see his grandfather, Laxus looks up and states that his chances at becoming Master have increased once more; He releases Fairy Law and yells for Fairy Tail to die. In the midst of all this, as bright light shines all throughout town, Laxus declares that he'll build it all up from scratch, a guild that can never lose. When the smoke clears, Laxus announces that he has surpassed Makarov, however he expresses shock when he sees that Natsu, Gajeel and Levy are all unharmed.
Unable to comprehend what just occurred, Laxus begins to rage about such a thing happening; Freed of the Thunder God Tribe appears at the doorway to the cathedral, stating that no one has been harmed and that everyone is still alive, earning him the reply that he, Laxus, cast Fairy Law perfectly, meaning such a thing is impossible. Freed tells Laxus that the Magic saw deep inside his heart, explaining that he not inherited more than just his grandfather's Magic Power, but the heart that cares for his comrades as well. Freed adds that that spell only affects those the caster recognizes as a foe, meaning that Laxus does not truly see everyone as his enemy; he cannot lie to his Magic.
Laxus does not believe this and states that all who oppose him are his enemies; Freed replies that Laxus needs to stop and go see his grandfather. Enraged, Laxus yells that he is himself, not merely Makarov's grandson. Natsu stands up and says that Laxus needs to stop acting pompous, crying that blood ties mean nothing as Fairy Tail is one big family. With Natsu having struck a nerve, Laxus asks how he could possibly understand how he feels; Natsu replies that he doesn't understand, but that he doesn't need to as that's what comrades are for. Natsu charges forward, fists aflame, and shouts that they reach out to each other to get past things such as blood barriers. In response, Laxus surrounds his fists in lightning and demands that Natsu silence himself.
Charging at each other, the two Dragon Slayers burst through the roof of the cathedral, taking their battle to the skies. Tired of Natsu's inability to give up, Laxus shouts for him to simply disappear, but Natsu replies that he won't let Laxus have the guild even if it kills him, as it is the place that he and so many others call home. Unfortunately it is Laxus' fist that makes the first connection, sending Natsu reeling backwards, though he regains his composure and charges once more. Annoyed, Laxus asks Natsu why he doesn't die, barraging him with punches and kicks as he does so. Bleeding, Natsu tells Laxus that the guild isn't his and that he need to think very carefully about what he's doing; Laxus casts Lightning Dragon's Breakdown Fist and then steps on Natsu, yelling that it's a hundred years too early for him to be lecturing before kicking him across the floor, however Natsu's persistence allows him to rise once more. Seeing this, Levy pleads for Natsu to stop as he could die from his injuries, though he ignores her. Laxus, now having reached his boiling point, accumulates lightning in his hands and, ignoring Freed's protests to the casting of this particular spell, lets loose Lightning Dragon's Heavenward Halberd in Natsu's direction. Unable to move, Natsu bows down in preparation for his defeat at the hands of the spell, but, at the last second, Gajeel utilizes his iron to redirect the spell, effectively turning himself into a lightning rod to save Natsu.
The weakened Gajeel then screams for Natsu to go; angered, Natsu charges towards Laxus and pummels him with a flurry of Fire Dragon Slayer Magic spells, severely weakening him. In awe, Freed and Levy recognize Natsu's Dragon Slayer's Secret Art; Natsu wraps his hands in flames and whirls them around, casting Crimson Lotus: Exploding Flame Blade at Laxus, barraging him with a torrent of flame and sending him flying away. With Laxus lying defeated on the ground, Natsu hollowly roars at the sky in victory.
With the Battle of Fairy Tail over, the town continues to go on with the Harvest Festival celebrations as if nothing had occurred. As the goings on proceed, the townspeople discuss the postponement of the Fantasia Parade, which was announced due to the problems of the previous day, as well as the possible retirement of Makarov due to his poor health. Makarov, however, is revealed to be fine thanks to Porlyusica's timely intervention. The Fairy Tail Mages discuss how they will perform the parade because of all the injuries, however, it is eventually decided those who can still move are going to participate, surprising Juvia and Lucy. Gray, at this point, motions towards the heavily bandage Natsu and Gajeel; Natsu attempts to speak but his voice is muffled by the thickness of the bandages, however Gajeel can understand his every word, which disturbs Lucy.
The happy atmosphere suddenly tenses when Laxus enters the guild, prompting most of Fairy Tail to throw slurs at him and demand his immediate leave, though Erza silences them and points him towards Makarov's room. His path is, to his surprise, blocked by Natsu, who tries to speak; his words are translated by Gajeel: Natsu desires to fight Laxus again, but only as a one-on-one battle. Laxus walks past Natsu, irritating him, but then gives him a wave of his hand, signaling his agreement to Natsu's terms. When Laxus steps into the inner clinic, Fairy Tail returns to discussing the Fantasia Parade and arguing.
In the inner clinic, Makarov asks Laxus if he understands what he has done and what the guild truly is, to which Laxus answers that the guild is a gathering place for comrades, an agency for missions and a home to those who don't have a family of their own. Makarov tells him that the guild does not belong to him; the guild is built upon the trust and honor of each member and that is how they formed stronger bonds that can't be found anywhere else, a bond which Laxus has unforgivably violated. Laxus mutters that he understands and that he only wanted to make the guild stronger, causing Makarov to sigh and tell him that watching him grow up was his reason for living, and that all he ever wanted was for him to be happy. With shaking hands and a heavy heart, Makarov excommunicates Laxus for his treasonous actions. Turning his back and walking away, Laxus tells his grandfather that he understands and thanks him for everything. In tears, Makarov demands that he just leave.