Air date: April 7th, 1992 (UK), November 18th, 1991 (US)
Adapted from: The magazine stories "Percy's Night Out" and "Percy and the Dragon"
Percy is still teasing Thomas about the time he thought Percy was a ghost, but Thomas ignores him. Later, Thomas is asked to collect a special load from Brendam. What made Thomas terrified is that the special was none other than a dragon, but his driver tells him it is made of paper and is needed for a carnival.
Meanwhile, Percy is busy shunting trucks until he is stuck on a siding due to a broken signal, and has to stay there for the rest of the night until it's fixed. During his sleep, Thomas passes by with the dragon which awakes Percy who becomes terrified of seeing the dragon, hoping that he doesn't wake up again.
The next day, the signal is fixed and Percy goes to tell the other engines about the dragon, but others don't believe his stories. At the station, Percy sees the dragon again, but realize that Thomas is pushing it, making him cross. Thomas explained what happened and the two reconcile for their teasing.
Tropes featured in the episode:
- An Aesop: In the end of the episode, Thomas points one out that while he and Percy can be scared of some things at times, admitting it makes you brave.
- Call-Back: Percy won't stop teasing Thomas about the time he thought he was a ghost train, which comes back to bite him when Thomas scares him with the Chinese Dragon.
- Cassandra Truth: Percy had told the other engines that he had seen the dragon, but they all teased him for it.
- Compressed Adaptation: The episode merges two stories from the show's promotional magazine, "Percy's Night Out" and "Percy and the Dragon".
- Defeat Means Friendship: Thomas is sympathetic to Percy after giving him a revenge scare for his earlier prank in "Ghost Train".
- Digital Destruction: In the restored version, when Thomas is mentioned to go back to sleep after Percy brings up the ghost incident, a shot of Thomas looking angry has accidentally been used instead.
- Miles Gloriosus: Percy makes fun of Thomas for being scared by his ghost prank. When faulty points force Percy to spend a night on his own? He’s scared out of his wits, especially when Thomas passes with the dragon.
- Ominous Owl: Percy ends up creeped out by an Owl's screeching.
- Out-of-Character Moment: Duck was among the other engines who teased Percy for telling them about the dragon.
