The Narrator continues to travel for his job. As he goes around the country he meets men in bars who have bruises, cuts, and stitches. He asks them if they have seen Tyler Durden. They all say no but also call him "Sir" and wink at him. This continues from city to city.
His cross-country trip finally lands him in Seattle. There he enters a bar where the bartender is wearing a neck brace. The bartender welcomes him back to the bar. The Narrator is sure he has never been there before. He asks the man if he knows Tyler Durden. The bartender asks if this is a test. The Narrator says yes, it is a test. Finally, the bartender responds, "You stopped in last week, Mr. Durden." The Narrator reiterates he's never been there. The bartender says he was there last week and was asking him about a police crackdown that had been taking place in Seattle.
The Narrator begins to put the pieces together. Everyone calls him sir. Tyler seems to disappear and appear like magic. The bartender tells the Narrator, while calling him Mr. Durden, that he has a birthmark on his foot. Nobody else knows about this except Marla. The bartender shows the Narrator his hand. It has a lye burn just like the one Tyler gave the Narrator.
The Narrator rushes to his hotel and calls Marla long-distance. He asks her if they have ever had sex. She is bewildered by his question and upset with him. She tells him that he saved her life when she tried to kill herself. He asks her what his name is. She answers that it is Tyler Durden. The Narrator hangs up the phone in a panic.
The Narrator is unsure if he has been sleeping at all. He's not sure if he is awake or asleep now. Suddenly, Tyler is standing at the edge of his bed. He reprimands the Narrator for breaking his promise by talking to Marla about him. Tyler explains that while the Narrator thinks he is sleeping, he becomes Tyler. He doesn't have insomnia. Tyler takes over and is running around taking care of Project Mayhem business. They share the same body. That's why he is so tired all the time. Tyler has set up fight clubs all over the country and established Project Mayhem nationwide too.
Tyler explains that he came to Seattle because the local police commissioner had decided to crack down on fight club and Project Mayhem. So Tyler issues a homework assignment to have the testicles of the commissioner brought to him. A team is put together and they ambush the commissioner while he is walking his dog one night. With no uncertainty they threaten to castrate him if he does not call off his investigation. If he doesn't they'll take his testicles and make sure the news becomes public knowledge. Tyler tells the commissioner that they have nothing to lose. He tells the commissioner that the very people he is trying to stop are the people he depends on. These are men who connect his calls, cook his meals, guard his home, and process his credit card charges. The commissioner agrees and the men let him retain his testicles. They knock him out with ether and leave.
Tyler finally reveals that Marla's relationship with him is really a relationship with the Narrator. She doesn't know him as two different people. She loves him. She thinks his name is Tyler Durden. The Narrator says this can't be happening, that Tyler is a projection. Tyler contends that maybe the Narrator is his projection. The two sides are now at odds for control of one body. Tyler is looking to force the Narrator's personality out.
Suddenly, the phone is ringing and the Narrator wakes up in his hotel room. He picks up the receiver but the line is dead.
The Narrator flies back and returns to the house on Paper Street, where Marla is waiting for him. He is afraid to look in the fridge at the house now, due to Tyler’s castration threats. The house is overrun with space monkeys. They keep a close eye on him and Marla and he suspects they have been following him around.
He takes Marla to a Denny’s restaurant to talk. The waiter there calls him “sir” and tells him that the food he orders will be free of charge. Marla is confused but orders food anyway. The Narrator asks the waiter to make sure they are only served clean food.
He shows Marla his license and explains that his name is not Tyler Durden, though that is who the space monkeys know him to be. He asks for her help. Tyler is slowly taking over more of his life and soon there won’t be any remnant of the Narrator left. He will just become Tyler full-time. He invented Tyler to escape his depressing boring life, and now Tyler may take his identity from him. He asks Marla to keep him awake all the time so that Tyler cannot take over. It’s just like the night Tyler had to keep Marla awake so she wouldn’t die. In the event that he does fall asleep, he needs Marla to follow him around and record what he does so that he can spend his waking hours trying to undo the damage.
Big Bob is on a “chill-and-drill” assignment when he is killed. Big Bob had used a refrigerant to freeze the bolt on a lock, and a drill to shatter the lock. This is the same method Tyler used to break into the Narrator’s condominium before blowing it up. The police mistook a cordless drill Bob was carrying to be a gun and shot him. Nothing exists to tie Bob to Project Mayhem.
In all the fight club chapters that evening, the men chant Big Bob’s name. “His name was Robert Paulson,” they yell. Only in death do members of Project Mayhem have a name. The Narrator goes to the fight club chapters to shut them down. He tries to reason with the men. It has gone too far, he says. The members simply begin reciting the rules of fight club to him. He tells them that he is ordering them to go home, that he is Tyler Durden and that fight club is canceled. Instead, he is forcibly removed from each location so that the fights can begin.
Chapter 21 brings Palahniuk's reveal of the novel's plot twist. While in Seattle looking for Tyler, the Narrator meets a bartender who tells him that he was in that same bar the week before. The Narrator has no recollection of this. The bartender addresses the Narrator as Mr. Durden. The Narrator calls Marla and she addresses him as Tyler too. Suddenly, the implications of his insomnia become clear. The Narrator has simply been becoming Tyler, a persona he takes on, instead of actually sleeping. The Tyler persona has slowly been taking over his life.
Tyler reveals that Marla believes he and the Narrator to be one person. She is in love with Tyler and doesn't know the difference between the two personas. The awkward triangle that has existed between the three of them hasn't been a triangle at all as far as she has been concerned. The Narrator is now forced to decide who he is. Does he want to be himself or let Tyler take over completely? Tyler wants control of the body they share and he is perfectly happy with removing the Narrator completely. Marla represents a threat to him. If the Narrator decides to be with her, Tyler will no longer be a necessity. Tyler issues warnings to stress his commitment to his own existence. He warns the narrator that if he ties himself to his bed or takes sleeping pills, all bets are off. While Tyler's threat is a fair warning, it also signals an inevitable confrontation. At some point the Narrator's body will become the battlefield over which these two personas must fight.
When the Narrator finally shares this new information with Marla, he also realizes that he has no control over what Tyler might be doing. When he becomes Tyler he cannot intercede. Tyler is cognizant of the fact that the Narrator is aware of the situation. Up until now, it has been his secret. So, the Narrator must now do all he can not to fall asleep, a complete reversal from his original intent of curing his insomnia. Because Tyler can be creating all kinds of havoc during the night, the Narrator asks Marla to follow him and record what he does so that he can spend his waking hours trying to undo it.
Tyler's short speech to the Seattle police commissioner ("We are the middle children of history...") is also important to note. This passage is also repeated nearly verbatim in the film adaptation. Tyler presents his argument in a historical context, arguing that his generation has been raised on a false narrative provided by television, mass media, and in the absence of a father figure. His plea is to allow his ideology, a vision of a new type of golden age, to be inserted into the flow of human events. If he can do this, Tyler believes, the true relevance of the men of his generation will be evident. In this context, Tyler is advocating a role as a creator and destroyer. By removing the modern world he will create a new era. Tyler seems to believe that the natural state of men has been diluted over time by a world that has become increasingly feminine. He pines for a return to a historical sense of masculinity, seemingly unaware that this past age of manliness may be entirely a false construct that never actually existed.
Interestingly, Palahniuk presents a world that, as far as the Narrator is concerned, more or less already belongs to Tyler. Everywhere the Narrator goes, he is recognized. Every man addresses him as "sir." His movements are never unnoticed. Tyler has not simply taken over the Narrator's life, he has taken over reality itself. The entire context of the world the Narrator once inhabited has shifted to one that belongs to Tyler. Tyler essentially becomes a god, lording over his creation. If allowed, he will remake it in his image. In this world, Tyler promises that he will teach each man to be his own true master, but to do this each space monkey must relinquish his own independence and accept Tyler as his personal leader and god or father. Tyler is therefore advocating his own autonomy by becoming the authority figure he never had in his own life. He imposes the father/son structure on the space monkeys and they willingly accept it because it is the relationship structure they have been seeking. When this is considered vis a vis the Narrator's desire in creating Tyler it can be argued that the Narrator is seeking to create an external persona to exact control over himself, a way to become his own boss.
Bob's death makes the ideological extremity of Project Mayhem a reality for the Narrator. It is where the Narrator finally draws a line. His friend, someone who trusted him completely, is now dead. Bob's death is particularly upsetting as he comes to symbolize innocence early on in the novel, someone who simply wanted to be accepted. Upon entering fight club and Project Mayhem he had gained some of that acceptance and he had taken orders without question, trusting the Narrator/Tyler Durden. Getting arrested would have meant being kicked out of Project Mayhem, so Bob may have deliberately held the electric drill instead of dropping it when asked by the police officer. His character can be described in cinematic and literary terms as the "sacrificial lamb," a character whose death illustrates how evil the villain is and to push the central character into action. When the space monkeys begin chanting his name it is an empty tribute. Palahniuk presents it as grotesque and exploitative. To accept the body in front of them as a real person would mean stopping and questioning what they are doing. Breaking into a ritualized chant allows them to distance themselves from the harsh reality of Bob's demise.
This disregard for the loss of life that is presented by the space monkeys, and passed down to them from Tyler, is disturbing to the Narrator largely because it does not run parallel with his own beliefs but was still born from somewhere in his mind. This duality once again paints Tyler as a monstrous creation that has gained its own independence and now wishes to do away with its creator. Realizing that there are any number of young men as well as other innocents who may die because of events he has put in motion, the Narrator tries to shut down fight club, but his attempt his futile. It has taken on a life of its own. Tyler has undoubtedly planned for such a development and set up contingencies. It does not require a leader to continue to exist and progress.