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Bilbo Baggins tried to sit out from the battle on Ravenhill which was held by the Elves and where also Gandalf had withdrawn to. Bilbo Baggins, while invisible due to the Ring, tried to sit out the battle on the spur held by the Elves.

The 500 Dwarves and 200 Lake-men formed up on one spur and over 1000 Elves on the other, while a light rear-guard lined across the mouth of the valley to lure the Orcs between the two, and thus destroy them. They arranged their forces on the two spurs of the Mountain that lined the valley leading to the now-sealed off great gate the only entrance to the Mountain. The three commanders agreed that the Orcs, Wargs, and Bats were the enemies of all, and previous grievances between them were put on hold in face of the greater threat. They had been incited by Gandalf's earlier slaying of the Great Goblin, but had now mobilized for a full-scale attack after hearing news of the death of the Dragon and the now relatively unguarded treasure hoard.

When Dáin's forces arrived, a battle was almost joined between the two sides (now three armies were on the field) but at the last moment, Gandalf intervened between the two and revealed that while they were bickering amongst themselves, the Goblins of the Misty Mountains and Grey Mountains under Bolg were using the opportunity to march against them. These reached Dáin II Ironfoot of the nearby Iron Hills, and he marched to the Lonely Mountain with 500 heavily armed Dwarves, most skilled veterans of the War of the Dwarves and Orcs. However, Thorin had sent messages of his plight to his relatives using talking messenger Ravens that lived on the Lonely Mountain. Thorin and Company were then trapped in a bloodless siege, with Thranduil and Bard hoping to wait them out.