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A new boy named Max Demian joins school. He is in the same class as Sinclair. He is older than the other boys and wears a mourning band. He talks to Sinclair and they walk together. Demian has a different interpretation about the story of Cain than the one, which the teacher has given them. According to Demian, Cain was a brave boy who killed his weak brother. He looks upon Cain as a hero. Demian considers the sign on the head of Cain and his children, as a mark of distinction. He feels that people with courage and character seem sinister to the others.
Sinclair himself had been a good person a sort of Abel who had lived in a beautiful world of goodness and light provided by his parents. But now he feels like Cain and imagines himself to bear the marks of Cain. He wonders why Demian speaks contemptuously about those who are timid and actually chosen by God.
Demian exerts fascination on the other students too. There are rumors that his mother is wealthy. He and his mother may be Jewish or Mohamedans. They do not attend church. Demian is known for his physical strength. Once he is violent with a boy. The boys talk about him being intimate with girls and about him knowing everything.
Sinclair is terrorized by Kromer who torments him. He has terrible dreams about him, which keep him in a disturbed condition. His parents are distressed to see him so upset. They treat him more like an invalid than a scoundrel. They pray frequently for him and are sympathetic towards him. Most people do not believe that a child of little over ten could have such intense feelings. But the truth is that he suffers intensely.
Sinclair again meets Kromer who pokes him in the ribs, laughs and offers him a damp cigarette, which Sinclair refuses. Kromer then orders him to bring his sister to him. Sinclair realizes that this is monstrous, and the beginning of a new torture. As he walks sadly, he hears the cheerful voice of Max Demian. Demian sympathizes with him and reveals that he knows that a boy named Kromer is troubling him. He asks whether he studies in a public school and what grade he is in. Sinclair informs Demian that Kromer is in the fifth grade, but pleads not to tell him anything. Demian assures him that no harm will come to him. He advises him not to be afraid as fear can destroy completely. Sinclair admits that he owes Kromer some money, but when Demian offers to pay, he tells him that will not help. Demian assures him that they will find a way out.
Sinclair again begins to see the world as bright and joyful. He is no longer tormented with fear. The whole episode of guilt and fright slips from his memory with incredible speed without leaving any apparent scars or deep impressions. He shows the damaged piggy bank to his mother and confesses his guilt. He also informs her how he was bound to an evil tormentor. His mother does not fully understand what he is talking about, but by his changed expression feels that he is cured and restored to her. Both his parents feel relieved. Sinclair plays with his sisters, sings hymns and is happy that he has regained his peace of mind and the confidence of his parents. He now does not wish to associate with Demian.
Six months later Sinclair asks his father why some people feel that Cain is better then Abel. His father is shocked and says that it is the work of the devil to destroy their faith. He warns him seriously against having such ideas.