After the Coast Guard rescues Percy, Annabeth, and Grover and drops them at Santa Monica, Percy works out what happened in the Underworld. Hades did not steal Zeus's master bolt; someone planted the bolt on Percy to frame him and drive Zeus, Poseidon, and Hades into war. Percy quickly identifies Ares as the one who set the scheme in motion when the war god appears on the beach waiting for them.

Ares admits that he arranged the delivery of both Zeus's bolt and Hades's helm, hid the bolt in Percy's pack, and expected Percy to die in the Underworld so the gods would blame one another. As Ares boasts about the coming family war, Percy notices that Ares is evasive about the original theft and seems influenced by another power. Percy realizes Ares is not the true mastermind and that the same dark force from Tartarus is pushing him. Because Percy might still return the bolt and stop the conflict, Ares decides Percy has to die.

Percy refuses to run and challenges Ares directly. Before the duel, Annabeth gives Percy her camp bead necklace and ring as a sign of reconciliation between Athena and Poseidon, and Grover gives Percy a tin can as a satyr's token of support. Ares first sends a monstrous boar, but Percy kills its tusk and uses the sea to swallow it. Then Ares accepts the duel and fights Percy with a massive sword while Percy stays near the surf to draw strength from the water.

The fight shows the gap between Percy and a god: Ares is stronger, longer-reaching, and able to predict Percy's moves, while Percy survives by reacting fast and thinking tactically. Police and onlookers gather, seeing the divine weapons as guns, and Ares escalates the chaos by blasting the patrol cars with fire. Percy endures the pressure, retreats deeper into the waves, and secretly stores up the tide. When Ares overcommits, Percy releases the water, leaps over him, and tricks him into exposing an opening, then stabs Ares in the heel with Riptide.

Ares is stunned that Percy has wounded him, but before he can retaliate an overwhelming dark presence passes over the beach and stops him. Forced to back down, Ares curses Percy and vanishes, leaving behind Hades's helm. The Furies then arrive, and Percy gives them the helm with orders to tell Hades the truth and call off the war. Exhausted, Percy shares an unspoken realization with Annabeth that a much stronger power stands behind Ares, then recovers the master bolt and insists they fly to New York immediately to reach Olympus before the deadline.