Jacob walks through the woods with the invisible boy, Millard, and Emma, who can somehow conjure fire in her hands. They finally reach the children's home, but it is now beautiful instead of broken and abandoned. He sees lots of other children, many of whom he recognizes from all the photographs. Everything is exactly as his grandfather described in the stories, and the children are clearly magical, each with some special ability. Millard calls them "peculiar."
Jacob is taken inside to meet the headmistress, Miss Peregrine. He recognizes her immediately from the photos. She tells Jacob that she has been watching him in her alternate form—a peregrine falcon. She is surprised at how little Jacob knows about them, how little Grandpa Portman actually told him. Miss Peregrine deduces that Grandpa Portman is dead, and Jacob explains how he died. She is angry and upset, remembering how she warned him not to leave the island. It is revealed that Emma had been eavesdropping on their conversation, and she is distraught, having been Grandpa Portman's sweetheart when they both lived here.
Miss Peregrine then tries to answer as many of Jacob's questions as she can. She explains the difference between coerlfolc, or common people, and the hidden syndrigast, or peculiar spirit. There are peculiars all over the world, but they must live in hiding, since common people often believe them to be dangerous witches, ghosts, or shapeshifters. A special kind of peculiar, a bird shapeshifter called an ymbryne has the ability to manipulate time—Miss Peregrine is one of these. Ymbrynes set up isolated enclaves as safe places for peculiar children, creating temporal loops where time remains on one day so that peculiar folk can live indefinitely. Jacob remembers his grandfather's words: "Find the bird, in the loop."
This loop is stuck on September 3, 1940. The peculiars were on Cairnholm for ten years before this date, but they did not need isolation until then, because if they had not entered a loop then they would have been bombed and killed. Miss Peregrine recounts the other ymbrynes and their loops, particularly Miss Finch and Miss Avocet. Miss Avocet and Miss Bunting teach an academy for ymbynes that Miss Peregrine once attended. She explains that only women can be ymbrynes because men lack the seriousness required of such responsibility.
Miss Peregrine invites Jacob to stay for dinner, and he does. She introduces him to the other children as Abraham's grandson Jacob, but does not tell them that Abe is dead. Jacob watches all the children's peculiar eating habits - one girl, Claire, has a mouth on the back of her head. The children ask Jacob a lot of questions about the future, and they are a bit disappointed when they learn it is not as grand as they excepted it to be. The kids all tell Jacob that they are all around seventy and eighty years old, having been in this loop for around seventy years.
Suddenly there are booms outside; it is the Germans, come to bomb them. Jacob is afraid, but the kids laugh and say it is merely the changeover, when the loop resets to the beginning of the day. They take him outside to seek it, and it looks like a fireworks display. Jacob watches the bomb fall and it freezes just before it hits, and then everything goes white and the bomb disappears. Emma escorts Jacob home for the night back through the cairn, and apologizes for the way she treated him earlier. His father is angry at him for spending so much time alone at the abandoned house, and makes him speak on the phone to his psychiatrist, who tells his father to give him some breathing room.
Jacob heads back to the loop the next morning, lying to his father that he met some people from the other side of the island there and would be hanging out with them. Emma is waiting at the bog for him, and they make it through the cairn and into the loop just in time for a performance the children are putting on about their abilities. Jacob learns about their peculiarities in this way. Millard is invisible, Olive can levitate, Emma can make fire and swallow it, Bronwyn has superhuman strength, Hugh has bees living in his mouth, and Fiona can instantly grow plants and flowers. They used to perform this show and travel around the world, making money by pretending their abilities were just magic show acts.
After the show, the kids walk through town to get to the harbor to go swimming. One child, Horace, wears a suit and tailcoat there, as he does everywhere he goes—his peculiarity is his prophetic dreams. Walking through town, Jacob is perturbed to notice the same things he saw the day before. Millard says he is compiling an account of the day in the loop experienced by every single human and animal resident of Cairnholm, and has spent twenty-seven years on this already. They go swimming, and then Jacob tells them all about the world in the future. They are amazed by his accounts of the technology and lifestyle in the present. As they head back to the house, Emma flirts a bit with Jacob, and he invites her over into his world for a day. Miss Peregrine would never let her over for that long, so instead she comes through the cairn for one minute so she and Jacob can take pictures on his cell phone together.
Jacob makes it back into town and runs into his father, who tells him that something happened and they need to get back quickly. The people at the pub are trying to figure out who killed a load of the island's sheep, and they interrogate Jacob about where he was. He comes up with a quick excuse and says the friends he told his father about are imaginary, and he was actually alone all day. Eventually Jacob convinces them that it was not him, and they show Jacob and his father the dead sheep, killed with clean knife cuts and covered in blood. People eventually start to think it was Worm and Dylan, but Jacob does not think it was them. His father gets angry at him for lying about meeting up with friends, and then Jacob goes to bed thinking about Emma.
This novel works through the world-within-a-world model of fantasy literature, and this begins to come to light in these chapters. Jacob, the protagonist, is from the world we recognize, and has lived his entire life without knowledge of the fantastical part of the world that exists alongside it. Fantasy novels like this one operate on the idea that everything is not what it seems. In these chapters, Jacob learns for the first time that his grandfather's stories really were true and that this peculiar world has existed alongside his own all along.
At last Jacob meets Miss Peregrine, the figure that all his grandfather's clues have been leading up to. Up until this point, readers have had to form their own preconceptions of her character. Within one conversation with her, however, much of her characterization is revealed. Miss Peregrine serves two important roles for these children: she is their teacher, helping them to grow and learn, and encouraging proper discipline in all situations. But she is also a mother figure for them, in the absence of their parents, protecting them from the evils of the outside world and comforting them when they need it. Miss Peregrine is the backbone that holds these children together, and Jacob learns that quickly.
Author Riggs approaches characterization in an interesting way in these chapters, because as Jacob first meets the children, they are each characterized primarily by their peculiarity. Their abilities are their primary character traits, and it is hard at first for Jacob to see past these and recognize the other qualities that define them as a person. It is clear that this is a recurring problem for peculiars; as Jacob is watching the peculiars' performance, Emma takes the time to emphasize that even though Bronwyn is known for being strong and tough, she actually has a soft heart. These children must work to be known for something other than just their peculiar abilities.
Jacob witnesses the "changeover," or the point when the loop resets to the beginning of the day, and this is an important moment within the larger theme of time in this novel. This moment shows that Miss Peregrine has the power to reverse time, and, in this peculiar way, even cheat death. At this moment, Jacob must reevaluate many of his previous conceptions of the universe and adjust his perspective with the knowledge that such things are possible.
Jacob's budding relationship with Emma is extremely complicated because of the way it transcends time. Right now, it is clear that Jacob has feelings for Emma—however, it is less clear whether Emma has feelings for Jacob, too, or whether this is just an extension of her former feelings for his grandfather, Abe. It is possible that Emma may only attach herself so closely to Jacob because he brings back memories of Abe. This tension between past and present will become a significant source of conflict in their relationship later on.
Before he came to Cairnholm, Jacob was a loner with very few friends and a subpar relationship with most of his family. In the loop, however, Jacob fits in immediately, able to instantly find his footing and make friends with these children despite their vast differences in circumstance. In these chapters, Jacob comes out of his shell more than readers have seen him do so in the entire book thus far, and it is clear that he is undergoing a transformation.