The following day, Claude is captured by Father Solomon's men. Having witnessed Claude performing a card trick earlier, Father Solomon claims he's a student of the dark arts and attempts to force the frightned Claude to reveal the Wolf's identity. When Claude is unable to do so, Father Solomon locks him up in a large iron elephant brazen bull. Roxanne reveals that Valerie is able to communicate with the Wolf in exchange for Claude's release, but he is already dead by the time the Captain opens the elephant. Believing Valerie to be a witch, Father Solomon has her captured and displayed at the town's square in order to lure the Wolf out so he can kill it. Henry and Peter join forces and help Valerie to escape. Peter is captured by the Captain and thrown into the elephant, while Father Solomon orders Henry to be killed for helping Valerie. Father Auguste saves Henry and is then killed by Father Solomon.
Henry takes Valerie to the church, but they are attacked by the Wolf, who bites off Father Solomon's hand, which contains silver-coated fingernails. The townspeople shield Valerie from the Wolf, who is once again forced to flee, but not before burning a paw by touching holy land. Valerie dreams that the Wolf is her Grandmother, who lives in a cabin in the nearby woods, so she goes to check on her. Father Solomon, having been cursed, is killed by the Captain.
After retrieving Father Solomon's hand, Valerie rushes to her Grandmother's cabin, but is confronted on the way by Peter. Noticing that his hand is burned in the same place where the Wolf burned its paw trying to enter the church, Valerie assumes Peter is the Wolf and stabs him. Arriving at Grandmother's house, Valerie is horrified to find her dead, and learns that the Wolf is her father, Cesaire. He reveals that the curse was passed to him by his own father, and he intended to leave the village but wanted to take his children with him. He sent a note to Lucie pretending to be Henry to meet him at night so he could ask her to accept her "gift". However, upon confronting her, he couldn't communicate with her, and, realizing she was not his daughter, murdered her in a fit of rage. He then took revenge against Adrian, his wife's lover, and now wants Valerie to accept the curse.
Valerie refuses, just as Peter appears and confronts Cesaire, who bites Peter and tosses him aside. Peter is able to throw an ax into Cesaire's back, distracting him. Valerie stabs Cesaire to death with Father Solomon's hand. Together, Valerie and Peter fill Cesaire's body with rocks so he can never be found and dumps the body in the river. Peter departs in order to learn how to control his curse, vowing to return only when he's able to ensure Valerie's safety. Valerie narrates that Henry found his courage and honor proctecting the village, her mother finally accepts that her husband will never come home, and the village remains to live in fear even though the wolf never returned. She then moves to her grandmother's house, leaving her old life behind.
The last scene shows Valerie outside the cabin, picking flowers. She hears a slight growl, looks up, sees the wolf, and smiles.