The narrator of "The Werewolf" sets the story's ominous tone with the opening sentence: "It is a northern country; they have cold weather; they have cold hearts." The people in this country are poor and live short, hard lives. They are superstitious to the point of conducting witch-hunts and stoning any witches found (identified by a telltale third nipple) to death. We focus in on a young girl. Her mother sends her into the forest to bring food to her ill grandmother, arming her with a knife and warning her against the dangers of the woods. The girl sets off on her journey unafraid because she knows the forest well.
As she is walking, the girl hears a wolf's cry. She turns with her knife drawn to face the beast, and when it lunges, she cuts off its paw. It retreats back into the forest. She wraps the wolf's paw in cloth and continues on her way. When the girl reaches her grandmother's house, the snow is so thick that no tracks can be seen in it. She finds her grandmother in bed with a terrible fever, and when shakes out the cloth to make a hot compress, the wolf's paw falls on the floor. It has changed into a hand, which she recognizes as her grandmother's because of a single wart on it.
The girl uses all her strength to pull back her grandmother's covers and beneath them discovers the cause of her fever. Her grandmother's severed arm is already rotting. Hearing the girl's cries, the neighbors rush in. They examine the hand and declare the wart on it to be "a witch's nipple." They force the grandmother out of bed and to the edge of the forest, where they stone her to death. The story ends with the summary, "Now the child lived in her grandmother's house; she prospered."
Bacchilega calls "The Werewolf" the first of "Carter's three 'women-in-the-company-of-wolves' stories." In this story, Carter combines the characters of wolf and grandmother to create a werewolf. In doing so, she suggests that man is not woman's only enemy. Woman collude in and also plot other women's destruction. As in "The Snow Child," "the other woman" tries to destroy the heroine presumably out of jealousy. The grandmother, like the Countess in "The Snow Child," fears that the younger, more beautiful girl will supplant her. Unlike the Snow Child, who dies without the chance to retaliate, the girl in "The Werewolf" changes from hunted into huntress when she first cuts off the werewolf's paw and then helps the neighbors kill her. Although she helped kill her grandmother in self-defense, the girl perpetuates the idea that women must be rivals and try to destroy one another. She shows no remorse for helping kill her grandmother, but rather "prospers" in her very house. In "The Snow Child," the Countess's clothes and boots give the girl power momentarily, and here the girl takes her grandmother's belongings and uses them to achieve success.
Like "The Company of Wolves" and "Wolf-Alice," this story maintains that knowledge is a woman's key to survival against those that mean to harm and consume her. But in "The Werewolf," the heroine's knowledge consists of inherited superstitions and "time-worn warnings" about the various forms of the devil. She lives in a region where people believe in supernatural predators and are jaded by violence even as children. Therefore the girl is no helpless child as we know Red Riding Hood to be; she "a mountaineer's child," accustomed to walking in wolf- and bear-infested woods and to carrying and using a knife. Whereas in traditional versions of Red Riding Hood, the reader is made to empathize with the defenseless heroine, here the narrator separates us from her. The narrator treats the heroine and the other people in her region with the bemused curiosity of a naturalist, explaining, "to these upland woodsmen, the Devil is as real as you or I." Because we are not made to definitely trust or pity the heroine, we do not necessarily have to hate the werewolf. Indeed, we can pity the werewolf as being a lonely and tormented half-creature who does not have enough self-control to refrain from preying on her own granddaughter. Just as we cannot blame the Countess in "The Lady of the House of Love" for her appetite, so we cannot necessarily blame the werewolf.
At the story's end, as Bacchilega confirms, we do not know whether to valorize or rebuke the heroine for her actions. After all, she becomes as ferocious as the werewolf in first cutting off her hand and then helping stone her to death. She may even have turned into a witch herself, for how else could she prosper in a region where people die early from the poverty and cold. Bacchilega suggests that "the devil" in whatever form-witch, vampire, werewolf-is only "the institutionalized projection of our fears and desires." We fear our own potential for wrongdoing, so we create fairy-tale monsters as external projections of it. If evil exists outside ourselves, then it cannot exist within ourselves. The villagers and the heroine in "The Werewolf" subscribe to this "scapegoating" by hunting and killing witches. Carter, Bacchilega says, implicates not only them but us, the reader, as being violent. By uprooting the traditional fairy-tale perceptions of right and wrong, Carter makes the story resemble real life more than allegory; she forces us to criticize not just the werewolf but also the townspeople and to question whether we subscribe to similar delusions of moral clarity.