Erza Scarlet manages to defeat Aria of the Element 4 after taking over his battle with Natsu. Element 4's wipe-out finally stops Abyss Break, much to Jose's anger. He is later appeased while Fairy Tail's spirits are damped when he announces Lucy Heartfilia's successful capture by Gajeel to Fairy Tail. Jose adds that with one of their objectives accomplished, all that's left is to eliminate Fairy Tail.
Erza tells Natsu to release his power. She states that there is an untapped power within him and he must believe in himself and awaken it to protect Lucy and the guild. She exclaims for him to go and that he will be the one to surpass her. Natsu leaves Erza while engulfed in flames.
Natsu comes erupting from the ground to rescue Lucy who was almost killed by Gajeel. Gajeel acknowledges his presence and states that he recognized Natsu's smell. Natsu, charged with fury, lands a strong fiery blow on Gajeel. Natsu catches Gajeel's steel pillar arm and tosses him to a wall and comes in for a flaming punch. Gajeel blocks this and they are later both in mid-air. However, this time, Natsu lands a punch on him. Natsu quickly follows up with Fire Dragon's Claw which Gajeel blocks and causes a small explosion. Happy also comes in and frees Lucy from her attachment on the wall. Natsu lands another anger-fueled punch on Gajeel and Lucy comments that she has never seen Natsu like that and Happy agrees. Gajeel flies in, yells at him to not get so cocky and attacks with Iron Dragon's Club. Natsu dodges the steel pillar created from Gajeel's arm and holds on to it when he casts Fire Dragon's Claw. However, Gajeel uses Iron Dragon's Sword, negates Natsu's attack and manages to hit him. Happy acknowledges this as Iron Dragon Slayer Magic. Natsu is again hit by a steely kick from Gajeel. The blades on Gajeel's Iron Sword start to spin and he tells Natsu that he wants to test how well his sword will cut him. He attempts to strike Natsu many times but he expertly dodges all of them.Gajeel addresses Natsu as "Salamander" and tells him that it's time to put an end to this. Natsu replies that he's just getting started. Gajeel transforms his skin to that of a Dragon's scales and punches Natsu with Iron Dragon's Hard Fist. Natsu blocks it but is blown away and bruised. Gajeel kicks again and Natsu dodges but Lucy, at the far side of the room, feels the strong air pressure caused by Gajeel's attack. This surprises her and Happy remarks that his Iron Dragon's Scales are making his attacks twice as powerful. Natsu manages to punch Gajeel, but it is Natsu who's hurt and not Gajeel because of the hardness of Gajeel's scales. Gajeel almost lands a very strong punch on Natsu when he manages to dodge Gajeel's hard fists. Natsu uses Fire Dragon's Roar while Gajeel uses Iron Dragon's Roar, much to Happy's surprise. This causes an explosion in the room and people are blown away. Gajeel says that it seems the difference between his and Natsu's Dragon elements are clear, that even if Natsu's flaming breath has the ability to burn down his opponents to ashes, it can't leave a single mark on steel yet his own Dragon breath can effectively slice up Natsu's body. Natsu retorts by asking him if he's sure about that, and then suddenly a crack appears on Gajeel's metal face. This surprises Gajeel's guildmates who are watching the battle. Natsu stands up and states that his flames aren't just flames, they are Dragon's flames that can incinerate anything. He adds that if Gajeel doesn't hit him with everything he has, he'll get blown to bits. Natsu proposes they stop feeling each other out and get serious. Gajeel accepts this challenge and states that there isn't enough room for two Dragons in the sky.
Natsu and Gajeel come in for a punch at each other and they both hit their targets and this causes another explosion. Natsu and Gajeel, suspended in mid-air, settle for an all-physical fist fight. Their battle seems evenly-matched and this surprises Gajeel's guildmates once again. They headbutt each other and then pause for a while, catching their breath. Some Phantom Lord Mages comment that Gajeel seems to be feeling the pressure and the others retort that Salamander's breathing heavily too.
Gajeel suddenly picks up a bunch of metal and starts to eat it, much to Lucy's surprise and Natsu's irritation. With Gajeel's energy replenished by his meal of steel, he confidently attacks Natsu with Iron Dragon's Lance: Demon Logs. Gajeel starts gaining the upper hand in their battle. Lucy stares at this disbelievingly, stating that a while ago Gajeel was staggering. Happy tells her that Dragon Slayers can restore their energy and Magic Power if they eat their respective element. Lucy realizes that Natsu needs to eat fire yet he can't eat his own Magical flames. She reaches into her pocket and tries to think if she has a Celestial Spirit that can make fire. She suddenly remembers that she lost her keys during the confrontation with Juvia Lockser and only Sagittarius is with her and she hasn't done their contract yet. But with Natsu in a desperate situation, she summons him anyway, tells him they'll make the contract later and asks him if he can make fire. Sagittarius replies that he can't because his skills lie in archery. Natsu tells Lucy to stay out of the fight because it's too dangerous. She complies and tells herself that she's useless.
Natsu tackles Gajeel with Fire Dragon's Sword Horn but the Iron Dragon Slayer manages to get a hold of Natsu's foot. He tells Natsu that he doesn't seem so tough on an empty stomach and then tosses him across the floor, telling him to eat steel. Gajeel hits Natsu again and he crashes through a wall. The Mages of Phantom Lord cheer for Gajeel while Happy and Lucy can only watch Natsu slowly losing. Gajeel tells Natsu to look at what he's trying so hard to protect. Outside, Natsu sees the Fairy Tail Guild crumble and collapse.
Natsu remembers his childhood memories of when he joined Fairy Tail. In his memories, Makarov, Fairy Tail's Master, explains to him the meaning of Fairy Tail: "Do fairies really have tails? Do they even exist? No one can say that for certain. Like them, this place is an eternal mystery... A never-ending adventure!" He also recalls how he met some of the Fairy Tail members then, particularly Erza and Gray Fullbuster. When asked by Makarov if he likes the guild, he says he does and that he'll join. He recalls wanting to take a dangerous job even if he doesn't really understand the details just because there's a high reward and a younger Mirajane teases him for it. He recalls how Erza was the one who taught him all the vocabulary a Fairy Tail Mage would need. Natsu also recalls his memories with Lisanna, from their childhood until their last memories as well as how he met Lucy, how he brought her to Fairy Tail and how she grew to love the guild like he did.Because of these memories, Natsu gets up and struggles to walk over to Gajeel. Lucy almost tells him it's enough, but Happy prevents her and tells her that he hasn't given up yet. Gajeel tells Natsu that his guild's in shambles and that it's all over. He then proceeds to continuously hit Natsu and then warns him that he's not a merciful type and he doesn't know what he could do to Natsu. Happy exclaims that with Natsu stopping the Magical Convergent Cannon - Jupiter and battling the Element 4, Natsu's used up too much Magic Power and if he could only eat fire, he could beat Gajeel. Sagittarius hears this and states that there has been a slight misunderstanding. He tells Lucy that when she asked him if he could make fire, he said no, but it seems that the issue is not whether he could produce fire per se, but whether or not he could help generate it. Just when Gajeel almost delivers the final blow to Natsu, Sagittarius fires his arrow and blows up the machine nearest to Natsu, creating fire which he gladly consumes. Gajeel seems to notice Sagittarius for the first time and asks where the "freaky man-horse" came from. Sagittarius says that setting machinery aflame is mere child's play for him and his arrows, earning him a glad praise from Lucy. Natsu thanks Lucy for his meal of flames. Gajeel warns him to not get so confident just because he ate fire because all that did is put them back on equal footing. Natsu doesn't hear any of this and hits Gajeel, saying that this is for all of Fairy Tail. Gajeel attacks with Iron Dragon's Roar but Natsu deflects this with his bare hands, much to Gajeel's shock.
Natsu vows to pay Gajeel back for everything and exclaims that he'll regret laying his hands on Fairy Tail. Gajeel attacks Natsu with Iron Dragon's Hard Fist which is blocked by Natsu's own bare hands and causes cracks to appear on Gajeel's steel arms. Natsu, once again fueled by fury, angrily yells at him for daring to hurt his friends with that stupid grin on his face. He rapidly throws Gajeel punches of Crimson Lotus: Fire Dragon's Fist for hurting his friends and their Master. Natsu strikes one last time as payback for Gajeel destroying their guild. This causes a very huge explosion and Gajeel's defeat.
Natsu declares that now, with the Phantom Lord Guild trashed by him, he and Gajeel are even.
Happy flies Lucy to where Natsu is laying down. Natsu tells them that he can't seem to move. Lucy is glad that Natsu is all right, his immobility aside, and tells him that he really goes over the top with these kinds of things, to which he replies with a big grin. Lucy adds that Natsu was "pretty cool".