The New Years' morning doesn't look promising. The storm rages outside and above all the time has come for Sir Gawain to pay his dues to the Green Knight. Sir Gawain feels uneasy but nonetheless start preparing himself for the fight. He puts his best clothes on and tides the green girdle around his waist. Then he goes to his horse, Gringolet, who has been kept in safe and taken care of in the best way and blesses the castle and everyone in it for their kindness. Ready to face the Green Knight, off he goes along with the servant that will show him the way to the Green Chapel.

After they pass a dreary road with dangerous river banks and cliffs, they come to a place near to the Green Chapel. The servant decides not to go further into the woods and friendly advice Sir Gawain to let go of the idea of fighting with the Green Knight, as he is dangerous and blood thirsty man whom has never been defeated before. He promises to keep it a secret if Gawain gives up on his mission, but he is determined to finish what he has started and not be a coward. Following the road, Sir Gawain runs into a smooth hill overgrown with bushes, near the river bank, with two holes at both sides. Perplexed by the sight he wonders if it is possible that he is looking at the Green Chapel. A sudden noise comes from the hill and he sees the Green Knight ready for the fight. He has a Danish axe in his hands, four feet long. Taking each step at a time, Sir Gawain introduces himself and reminds the Green Knight about the agreement they made one year ago. The Green Knight is in a hurry to give a deadly blow, so he asks Gawain to expose his neck. Sir Gawain does as he is told and acts as if he does not care about what is going to happen next. The Green Knight lifts his axe ready to blow when he sees Sir Gawain flinch. He mocks him from flinching and says that he did not flinch at the Camelot when Gawain cut off his head, but Gawain replies that he won't be able to pick up his head when he hits him and promises he won't flinch again. The Green Knight lift the axe once again and stops the blade just to congratulate Sir Gawain for keeping his word and not flinching this time. Sir Gawain accuses him of speaking too much and teases him that it must be out of fear. The Green Knight takes another blow, this time for real, but the blade only cuts Sir Gawain's skin. He then jumps and challenges the Green Knight to fight, but the Green Knight laughs and says that he has got what he deserved and refuses to fight anymore. Then he says the whole truth that leaves Sir Gawain speechless for a while. The first blow was for the night when he shared his kisses with the lord, the second blow also, but the third blow was for real because he was not honest and shared only kisses with him, not mentioning the green girdle he got. Moreover, the lord from the castle is actually the Green knight and he sent his wife to Sir Gawain just to test his loyalty. The Green Knight has nothing but the best to say about Sir Gawain, however he criticizes his decision not to mention the green girdle. Sir Gawain gets angry for being fooled in such a manner and curses them both for playing with him. Feeling that he should restore The Green Knight's loyalty somehow, he takes off the green girdle and offers it to him, but the Green Knight refuses to take it. He replies that the confession of his misdeeds is enough to restore his trust. Then he invites him to be his guest again, but Sir Gawain refuses kindly and asks for the Green Knight's true name before they go separate ways. The Green Knight introduces himself as Bernlak de Hautdesert. To make things more clear, he mentions the old lady in his castle, Morgen la Fay, who has learned many magic skills from Merlin and used them to turn him into the Green Knight in order to assay renown of the Knights of the Round Table and scare the queen Guinevere to death. Even worse, he informs Sir Gawain that the old lady is actually his aunt and King Arthur's half-sister. Once again, the Green Knight invites Sir Gawain to visit his house and makes everyone happy there since everybody loves him, but Gawain refuses and they separate at the spot.

Back at the Camelot, the king and queen are happy to see him safe and sound and everyone is eager to hear his story, so Sir Gawain starts from the very beginning, honestly narrating the story about the young lady who seduced him. He grieves for the spike he has to carry on his neck until the rest of his life as the reminder of being disloyal, but the court comfort him and they all agree to carry the green band as a sign of respect.

At the end, the author claims that this story is real and their traces can be found in the books of Brutus. He dedicates the last stanza of the poem to Christ.