During a famine a poor peasant, unable to support all his family, told his eldest son, Niels, that he would have to go out in the world and provide for himself.

Niels left home and went out to seek his fortune. As the evening of the first day drew on, he found himself in a dense forest, and fearing lest the wild beasts might do him harm during the night, he climbed into a tree. Hardly had he reached his perch, when he saw a little man running toward the tree. He was hunchbacked, and had crooked legs, a long beard, and wore on his head a red cap. He was pursued by a wolf, which attacked him just under the tree in which Niels was sitting. The little man began to scream; he bit and scratched, and defended himself as well as he could. But the wolf was the stronger, and would have torn the little fellow to pieces if Niels had not sprung down from the tree. As soon as the wolf saw that he had two to contend with, he fled back into the forest.

The troll then said to Niels:

"Thou hast preserved my life and done me a good service; in return I will also give thee something that will be of use. See! here is a hammer with which thou shalt be able to do smith's work that no one shall be able to equal." When the troll had spoken these words, he sank into the ground and disappeared.

The next day the boy wandered on until he came to the neighborhood of the royal palace, and here he engaged himself to a smith.

Now it just happened that a few days before a thief had broken into the King's treasury and stolen a large bag of money. All the smiths in the city were therefore sent for to the palace, and the King promised that he who could make the best lock should be appointed court locksmith, and have a handsome reward into the bargain. The lock had to be finished in eight days, and so constructed that it could not be picked by anyone.

When the smith, with whom Niels lived, returned home and related this, the boy thought he should like to try whether his hammer really possessed those qualities which the troll had said. He therefore begged his master to allow him to make a lock, and promised that it should be finished by the appointed time. Although the smith had no great opinion of the boy's abilities, he permitted the trial.

Niels then requested a separate workshop, locked himself in, and began hammering the iron. One day went, and then another, and the master began to be curious; but Niels let no one come into his shop, and the smith was obliged to remain outside, and peep through the keyhole. The work, however, succeeded far better than the boy himself had expected; and, without his really knowing how it came to pass, the lock was finished on the evening of the third day.

The following morning he went down to his master and asked for some money. "Yesterday I worked hard," said Niels, "and to-day I will enjoy myself."

He went out of the city, and did not return to the workshop till late in the evening. The next day and the next he did the same, and so through the rest of the week.

His master was very angry at this, and threatened to turn him away unless he finished his work at the appointed time. But Niels told him to rest easy, and engaged that his lock should be the best.

When the day arrived, Niels brought his work forth, and carried it up to the palace. His lock was so ingenious and so delicately made, that it far excelled all the others. Niels's master was acknowledged as the most skillful, and he received the promised office and reward.

The smith was delighted, but he took good care not to confess to anyone who it was that had made the curious lock. He received one job after another from the King, and let Niels do them all.

In the meantime the report spread from place to place of the wonderful lock the King had got for his treasury. Travelers came from a distance to see it, and a foreign King came among them. When he had examined the work a long time he said that the man who had made such a lock deserved to be honored and respected.

"But however good a smith he may be," added the foreign King, "I have his master at home."

He continued boasting in this manner, till at length the two kings made a wager as to which smith could execute the most skillful piece of workmanship. The smiths were sent for, and the two kings determined that each smith should make a knife.

The smith related to Niels what had passed, and desired him to try whether he could make as good a knife as the lock he had made. Niels promised to do so, although his last work had not brought him much. The smith was in truth a mean man, and treated Niels so niggardly that sometimes he had not enough to eat and drink.

One day, as he was out buying steel to make the knife, he met a man from his own village, and, in the course of conversation, Niels learned that his father was in great want and misery. Then he asked his master for some money, but this was the answer: "You shall not have a shilling until you have made the knife."

Thereupon Niels shut himself up in the workshop for a whole day, and, as on the former occasion, the knife was made without his knowing how it had happened.

When the day arrived on which the work was to be exhibited, Niels dressed himself in his best clothes, and went with his master up to the palace where the two kings were expecting them.

The strange smith first showed his knife. It was so beautiful, and so curiously wrought, that it was a pleasure to look at; it was, moreover, so sharp and well-tempered that it would cut through a millstone as easily as through a cheese. Niels's knife, on the contrary, looked very poor and common.

The King already began to think he had lost his wager, and spoke harshly to the master-smith, when his boy begged leave to examine the stranger's knife a little more closely.

After having looked at it for some time, he said: "This is a beautiful piece of workmanship which you have made, and shame on those who would say otherwise; but my master is, nevertheless, your superior, as you shall soon experience."

Saying this, he took the stranger's knife and split it lengthwise from point to handle with his own knife as easily as one splits a twig of willow. The kings could scarcely believe their eyes, and the consequence was that Niels's master was declared the victor.

When Niels asked for payment, the master refused to give him anything, although knowing full well that the poor boy only wanted the money to help his father. Upon this Niels grew angry, went to the King, and told who it was that had made both the lock and the knife. The master was then called, but he denied everything, and accused Niels of being an idle boy, whom he had taken into service out of charity and compassion.

"We shall soon find out the truth of this story," said the King, who sided with the master. "Since thou sayest it is thou who hast made this wonderful knife, and thy master says it is he who has done it, I will adjudge each of you to make a sword for me within eight days. He who can make the most perfect one shall be my master-smith; but he who loses shall forfeit his life."

Niels was well satisfied with this agreement. He went home, packed up all his things, and bade his master farewell. The smith would gladly have made all good again, but Neils appeared not to understand him, and went his way. He engaged with another master, and began cheerfully to work on the sword.

When the appointed day arrived, both Niels and his former master met at the palace, and the master produced a sword of the most beautiful workmanship that anyone could wish to see. It was inlaid with gold and set with precious stones. The King was greatly delighted with it.

"Now, little Niels," said he, "what dost thou say to this sword?"

"It is not so badly made as one might expect from such a bungler," said the boy.

"Canst thou show anything like it?" asked the King.

"I believe I can," answered Niels.

"Well, where is thy sword?" said the King.

"In my waistcoat pocket," replied Niels.

Hereupon there was a general laugh which was increased when they saw the boy take a little packet out of his waistcoat pocket. Niels opened the paper in which the blade was rolled up like a watch-spring. "Here is my work," said he. "Will you just cut the thread, master?"

The smith did it willingly, and in a moment the blade straightened out and struck him in the face.

Niels took out of his other pocket a hilt of gold and screwed it fast to the blade; then he presented the sword to the King; and all present were obliged to confess that they never before had seen such matchless workmanship.

Niels was declared the victor, and the master was obliged to acknowledge that the boy had made both the lock and the knife.

The King in his indignation would have had the master put to death if the boy had not begged for mercy on the culprit.

Niels received a handsome reward from the King, and from that day all the work from the palace was intrusted to him. He took his old father to reside with him, and lived in comfort and happiness till his death.