During vacation, prior to entering the university, Sinclair travels to Demian's former residence in his hometown to inquire as to his whereabouts. The old woman now living there shows Sinclair a photograph of Demian's mother. It is here that he realizes that this is the woman of his disturbing dream; she is his daemon, and she does exist.
Encouraged by this realization, Sinclair begins to look for her everywhere. Shortly after this event, in the university town, Sinclair once again, seemingly by accident, meets Demian, who informs Sinclair that the meeting was anticipated and that the initially attracting "mark of Cain" is now much more prominent on Emil's forehead. While talking about their respective pasts, the conversation is suddenly shifted to the state of affairs in Europe. Demian speaks of the inward rottenness of the various European societies and maintains that their collapse is inevitable. Once again Demian functions as a Nietzschean mouthpiece. The "herd instinct" of the fearful masses is condemned, and the shallow meaninglessness of the Europeans' lives is emphasized. Demian senses that Europe will collapse and then be reborn. The year is now 1913, and what he actually senses is the fast-approaching World War I.
It is at this point that the larger and most important aspect of the story becomes externalized. Throughout the novel, Sinclair and Demian have been compulsively concerned with themselves. Possibly they have been viewed as very egocentric. But it is only now that the several apparent paradoxes can be resolved. Demian now reveals the purpose of those with the "mark of Cain" when he visualizes the aftermath of the forthcoming chaos. It will revolve around those with the "mark," those who will determine the future. After the war, there will be no more oppression of the individual will, and the further development of the human species will once again be possible. Demian states that this goal, the ultimate perfection of the human race, is one expressed by both Jesus and Nietzsche. Now it is clear that Hesse has made a parallel in these two diverse doctrines, and the fact that the Christ figure, Demian, speaks the existential doctrine of Nietzsche is no longer a problem once it is clear that their respective goals are the same. Nietzsche had implored the isolated individuals, who were a chosen people, to seek solitude and self-understanding in order to benefit many others later. Thus Hesse's emphasis on self-knowledge is not really selfish in nature. Through a thorough understanding of self, one becomes more able to serve. Indeed, this idea of service is contained even more obviously in Hesse's other works: Siddhartha, Narcissus and Goldmund, The Journey to the East, and The Glass Bead Game (Magister Ludi).
The next day, Emil's dream becomes reality. He finally meets Demian's mother, Frau Eva, in the hallway of their home beneath his sparrow hawk painting. Momentarily speechless, Sinclair takes Frau Eva's hands, kisses them, and finally feels fulfillment. When Sinclair announces that his whole life has been a journey toward this goal and he has now reached home, Frau Eva smiles at him like a "mother." The first description of Frau Eva stresses the same characteristics possessed by Demian, only magnified infinitely.
During his first conversation with Frau Eva, she stresses to Sinclair that dreams must be followed until realized, but that each dream is replaced by another.
Emil's reaction to the meeting with Frau Eva is manifold. He is totally in awe of her and worships her, and yet, as suggested in his dream, he also loves her in a physical sense and desires her. Through Frau Eva, he comes to realize that his quest for awareness and harmony is different from the goals of the masses because the masses seek to preserve humanity as it was, while those with the "mark of Cain" seek an unknown distant goal for humanity which transcends the human condition at present.
The Demian residence serves as a meeting place for many types of intellectuals and philosophers, varying from astrologers to Buddhists to a disciple of Tolstoy. Those with the "mark of Cain" remained still somewhat isolated, forming an inner circle, concentrating on achieving such a level of awareness that no matter what would happen to the world, they would be able to understand it, remain stable, and if called upon to do so, to lead.
Demian speaks about the soul of Europe and in doing so is very reminiscent of Hesse himself in Blick in Chaos. In his essay on The Brothers Karamazov, he refers to the concept of a new breed of "Russian man." This peculiar being is a type of amoral beast not subject to any existing laws, combining the ferocity of an animal with the gentility of a saint, the splendor of God and the horror of Satan. Those with the "mark" must be ready.
Paralleling an earlier sensation in the story concerning Demian, Sinclair notices that when Frau Eva is present at the conversations of the group, all of his thinking seems to come from her and eventually to return to her. He gradually begins to sense that she seems, also, like a reflection of his inner being.
Sinclair's physical longing for Frau Eva grows in intensity. Sensitive to his feelings, Frau Eva guides Sinclair through stories. She feels that in order to find fulfillment in love, one must not consciously seek to be loved, but rather must learn to manifest his own love first. When a person becomes able to love, then the love of others, sensing this quality, will be attracted to that person.
One day in early spring, Sinclair, upon entering Max's room, observes him in a trance-like state resembling that which occurred during their confirmation class. Disturbed, he questions Frau Eva, who assures him that there is no need for alarm. Still upset, Sinclair goes for a walk. While walking in a gentle rain, he observes a strange phenomenon in the distant sky. Watching colliding cloud banks, he sees a gigantic bird emerge and take flight, causing thunderous sounds with its beating wings. The storm then becomes violent, mixed with hail, for a brief moment. It is followed by a sudden burst of sunlight and an unreal serenity. Once again, the symbolism of the sparrow hawk and the egg is employed. This time, however, the hawk is not just an internal symbol for Sinclair's development; it is external and universal, and it foreshadows the literal destruction of a world — that is, the destruction of pre-World War I Europe and the rebirth which is to follow. The bird becomes a harbinger of the war.
Sinclair describes his vision to Demian. Understanding Sinclair's vision, Demian associates it with a recent dream of his in which he visualized a vast, blazing landscape. Frau Eva also appears to have had a similar presentiment.