Meanwhile, Kaiba had begun to realise the power of the Millenium Eye, but he still beleived he could win with the cards that he had in his hand. Kaiba then set another monster and switched Rude Kaiser to defence mode. Pegasus began his turn by talking about his favorite cartoon, "Funny Bunny". Pegasus recealled how the bunny was so michevious, but Kaiba told Pegasus to make his move. Pegasus told Kaiba that that was his move. Kaiba was shocked that Pegasus's move was a toon, but Pegasus explained that his move was a whole world full of toons. Pegasus then played Toon World. At this time, Dark Rabbit entered the book. It then came out, transformed, and destroyed Kaiba's face down monster, Battle Ox. Dark Rabbit then re-entered Toon World. Pegasus explained that Toon World was the safest of havens and that his Dark Rabbit couldn't be harmed as long as it was in it. Kaiba then set a card and ended his turn.
Pegasus then decided to show Kaiba the true power of Toon World. Pegasus summoned the Blue-Eyes White Dragon that he had stolen from Kaiba earlier that duel. Blue-Eyes transformed into Blue-Eyes Toon Dragon. Blue-Eyes Toon then detroyed Rude Kaiser. Kaiba then realised that Pegasus could see the cards in his hand so he abandoned his present hand. he then drew, putting all his faith into the heart of the cards. Kaiba drew Blue-Eyes and he summoned it. Pegasus was shocked, but not discouraged.. Kaiba's Blue-Eyes attacked Pegasus's Blue-Eyes Toon, but Blue-Eyes Toon just dodged the attack. Pegasus explained that in Funny Bunny, the bunny was never captured so his toons couldn't be either.
The gang was shocked at the power of Toon World. They asked Yugi if he had heard of Toon World. Yugi told them that he had, but it never had been officially released because it was too powerful. Yugi told them that Pegasus must have the only copy.
Meanwhile, it was Pegasus's turn again. Since Kaiba had no hand, Pegasus decided to search Kaiba's mind and find out all the cards in his deck. Pegasus then played Shining Palace, which changed Toon World and made it more powerful. Blue-Eyes Toon was powered up by 500 attack points. Pegasus then ordered Blue-Eyes Toon to attack Kaiba's Blue-Eyes, but Kaiba activated Negate Attack. Kaiba then played Shadow Spell and captured Blue-Eyes Toon and lowered its attack by 800. Blue-Eyes Toon was then destroyed by Kaiba's Blue-Eyes(Pegasus's LP:1200).
Furious that Kaiba destroyed his beloved Toon monster, Pegasus played Dragon Capture Jar. Kaiba's Blue-Eyes was sucked in. Kaiba just set a monster during his turn. Pegasus then summoned Dragon Piper in defence mode. Dragon Piper started playing its flute. Kaiba realized that Pegasus was planning to re-summon his Blue-Eyes. Kaiba then flip-summoned Swordstalker and attacked, but Pegasus activated Doppelganger. Doppelganger copied Kaiba's Crush Card. As Dragon Piper was destroyed, Kaiba's deck was infected. Kaiba had no monsters left so all he could do was play Monster Reborn and revive Saggi, the Dark Clown. Pegasus then played Bickuribox and destroyed Saggi. Since Kaiba had no monsters left, he had to forfeit.
Pegasus taunted Kaiba for having lost his only chance to save his brother. Pegasus then used his Millenium Eye and transfured Kaiba's soul to a card. Shocked by what Pegasus just did, the Millenium Puzzle activated and Yami Yugi appeared. Yami informed Pegasus that he would pay. Pegasus reminded him that he still had to complete the tournament to have the honor to duel him.