Owen's performance as the Ghost of Christmas Yet to Come wins rave reviews in the Gravesend News-Letter and makes a huge impression on the audience, but Dan worries that Owen's solemn stage presence casts a pallor over A Christmas Carol's happy ending. When Owen comes down with a cold, Dan is encouraged, thinking that perhaps a sniffling ghost will be less terrifying to the children. John, however, is nervous about the effect Owen's sneezing will have on his portrayal of the Baby Jesus in the Christmas pageant.
The morning of the pageant, Owen and John walk to church with Mr. Fish, who is not a churchgoer, but who has been so overshadowed by Owen's performance in A Christmas Carol that he cannot resist going to watch. On the way, they meet Dan, who walks with them. Outside the church, the foursome encounters a miserable-looking Rev. Merrill, who has come for the pageant, along with Rev. Wiggin and Barb. Inside, Owen insists that, before he is wrapped in his swaddling clothes, he be wrapped in his "lucky scarf"--a gift to him from John's mother. Barb Wiggin and Owen argue while the children are assembling and preparing for the pageant, and at last Barb picks Owen up to carry him to his spot in the manger. She presses him against her breasts, and gives him a kiss on the mouth "for luck"; when she steps away, John can see that Owen has an erection protruding through his swaddling clothes: the Baby Jesus has an erection. John thinks that this was an act of intentional cruelty on the part of Barb Wiggin, teaching Owen the lesson that "someone you hate can give you a hard-on."
As the pageant begins, however, Owen regains control of himself. He directs a withering gaze at Barb Wiggin as the show begins, frightening her and causing her to drop Harold Crosby, the announcing angel, too quickly from the ceiling; after a ten-foot free fall, Harold's rope catches him, but he has forgotten his lines. Owen whispers them to him, but the entire congregation can hear as well. When Owen is revealed as the Christ Child, the "pillar of light" spotlight shines down on the manger scene; the heat is so intense that many of the children in animal costumes begin to faint. Mary Beth Baird, the Virgin Mary, becomes so overwhelmed that she dives onto Owen, who can only shoo her away by goosing her. He directs a contemptuous glare into the audience that quiets the murmuring; but then he sees his parents in the crowd, his mother sobbing incomprehensibly, and is plunged into a rage. He cries out, "WHAT DO YOU THINK YOU'RE DOING HERE?" The Meanys leave, and Owen directs Mary Beth and John (playing Joseph, of course) to carry him out of the church. As they march down the center aisle, the animals begin following behind them, forming a spontaneous procession off the stage. The children emerge in the snowy outdoors, and John bundles Owen into the cab of his parents' truck. Owen remarks, inscrutably, "IT'S A GOOD THING I WORE MY LUCKY SCARF."
Breaking away from his narrative of the Christmas of 1953, John describes a conversation he had with the rector of his church in Canada on February 4, 1987. Enraged about President Reagan's nuclear weapons policies, John launched into a diatribe against America and Americans; the rector, Canon Mackie, implied that what John was really upset about was the vestry elections, during which John was not even nominated for a position. Canon Mackie says that John's frequently-voiced anti-American opinions strike many of the Canadian parishioners of Grace Church, ironically, as quintessentially American. John continues to complain about nuclear arms proliferation, and Canon Mackie says that John lives in the past.
Remembering the Nativity of 1953, John writes that the vision of Owen Meany as Christ has replaced the actual Christmas story in his own mind: "a vision of the little Lord Jesus as a born victim, born raw, born bandaged, born angry and accusing; and wrapped so tightly that he could not bend his knees at all." He remembers the children standing in the snow after Owen drives away, fighting the exiting congregation to get back into the church. In the chaos--the congregation is baffled, Mr. Fish is commenting excitedly on the "primitivism" of the display, the children are milling about--John goes to get his and Owen's clothes. Suddenly Mr. Fish notices that Harold Crosby is still dangling up above the stage on his rope pulley; he has been abandoned by the enraged Barb Wiggin. Dan operates the machine to get him down. Barb Wiggin angrily tells John that Owen is not to be allowed back into the church until he speaks to her first. John, knowing that this declaration will cause Owen to cease coming to church altogether, warns Dan.
Angrily, Dan marches Harold Crosby over to Barb Wiggin, and reminds her that she left a young boy hanging twenty feet above a concrete floor. He tells her that she has no authority in the church, and that Owen is to be allowed back whenever he wishes to come; if Barb drops the matter, Dan says, he will not tell the Vestry members about Barb's oversight with Harold. Needless to say, Barb agrees. On the other side of the church, Mr. Fish is praising Rev. Wiggin for the success and inventiveness of the performance.