Thomas, Percy and the Dragon is the seventh episode ever made in Season 3.
Percy is still ribbing Thomas about the time he thought Percy was a ghost. Thomas pays no attention, and one night is asked to collect a special load from Brendam. Thomas is horrified to find it is a dragon, but his driver tells him it is made of paper and is needed for a carnival. Meanwhile, Percy is stuck in a siding while shunting and has to stay there for the night. Thomas passes by with the dragon and Percy is so terrified that he doesn't sleep at all. The next day, Percy sees the dragon again, but is indignant when he sees Thomas pushing it. The two make up their teasing.
- The dragon was said to be covered in lights, but it was actually lit up from underneath.