"I ran into a talking dog named Barbas who had a falling out with his master Clavicus Vile. Clavicus has agreed to take Barbas back if Barbas and I retrieve the Rueful Axe."
Follow Barbas to the shrine of Clavicus Vile in Haemar's Shame. Be prepared to fight a host of vampires and thralls once inside. Talk to the Daedra by activating the statue.
Return to the shrine of Clavicus Vile in Haemar's Shame. (If you never return to the shrine you keep the axe and keep Barbas as a follower. You can have Barbas in addition to another follower. Barbas is a good follower because he cannot die, go down, or take damage. Unfortunately, for stealth characters, he will see you in stealth and will get a bounty if he sees you steal, kill etc..)
Kill Barbas to keep the Rueful Axe or refuse and wait until dialogue completes to retrieve Clavicus Vile's Masque (if you're going for the Oblivion Walker achievement/trophy take the Masque of Clavicus Vile)
The quest is over at this point, but the player still may return to Lod for a small reward (25 ) by telling him, "The dog was more trouble than he was worth."
Walkthrough
The quest can be obtained once the player reaches level 10. A guard or Lod himself (whether "Some Light Theft" quest is completed or not) will say he has been looking for a dog and spotted one near the entrance of the city. Lod can be persuaded for half payment (25 can be received) or the task can be taken.
Barbas can be found west of Falkreath along the road beyond the fork where he will approach the player. The player can return to Lod once Barbas is found, hand in the quest and then return to Barbas where he is waiting.
Barbas can be a little tricky to follow as there is possibility to run into enemies. It is best to stay behind him to avoid losing him.
Barbas will lead the Dragonborn to Haemar's Shame where Barbas and player will fight vampires and their thralls, depending on current level. Haemar's Shame is located directly in between Ivarstead And Fort Neugrad. There are few levelled enchanted items, an Arcane Enchanter and an Alchemy Lab. The shrine of Clavicus Vile is located deeper in the cave, guarded by four to five vampires. Activate the statue of Clavicus Vile and he will ask what he can do for the player. Choosing any given speech option will result with his request to retrieve his Axe from Rimerock Burrow. Barbas can be kept or told to stay. Behind the statue on upper walkway is a chest with levelled items and a chain that opens a barricaded tunnel leading back to Skyrim.
Rimerock Burrow is a small cave. At the end of a short tunnel, there will be Flame Atronach and Sebastian Lort, a Breton mage. He may summon a Frost Atronach. The Rueful Axe itself will be laying on a long table opposite an Arcane Enchanter. Behind them is a room with chest containing levelled loot.
The player must now return to Clavicus Vile. The player is given a choice to kill Barbas and receive the Rueful Axe or to spare Barbas and receive Vile's boon, the Masque of Clavicus Vile. Once the choice is made, the quest is finished, and the reward is received.(There is no quest option to keep Barbas but if desired you can just ignore the quest line and travel with him where ever you go)
Tip: Save before making the choice if this is the last Daedric artifact needed for the achievement. First take the mask so you get the achievement, then load the most recent save file. Then kill Barbas, and both the axe and the achievement can be owned.
Dawnguard
In the DLC Dawnguard, you may come across Barbas and the statue at Haemar's Shame. He may still be there depending if you have done this quest. During the Dawnguard mission, if Barbas is still alive he will try to kill the Vampires you are fighting. He never dies therefore he is good help.
Bugs
Click to show Bugs
If Barbas is addressed during the final dialogue, he does not join the shrine, and the player may not get the Masque.
360 If you this quest is completed successfully with 49 dungeon cleared the Delver Achievement will be earned.
360 Barbas may stop randomly and not move during the quest. This may take place near Haemar's Shame or after initially speaking with him. To fix this, fast travel somewhere and on return he should have entered the cave. He might be found near the shrine later on.
Some times Barbas may have trouble when travelling through Helgen. He may proceed into Helgen, wander around and walk back out repeatedly.
Sometimes, while following Barbas, upon running into a Vigilant of Stendarr, Barbas will disappear. To fix this, go to Haemar's Shame, and the Dragonborn will meet Barbas there.
Lod may die in a dragon attack. If he dies the quest cannot be obtained.
PS3 Barbas may run into a locked door and float up into the air until the door is unlocked.
360 Sometimes at the start of the quest Barbas will not appear, making the quest uncompletable.
If attacked while following Barbas, there is a chance he will go somewhere close and stop walking for a while.
360 At the very beginning of the quest while following Barbas, he may wander ahead while an enemy is encountered, and he doesn't stop to help fight. By making the quest primary and following the marker to Barbas, he can show up stuck in a glitch in the terrain in random areas. Hitting him with a few Destruction spells will transport him back to the nearest road, and he will resume the trek to the quest location.
During the final dialogue, if you speak to Barbas after choosing the masque over the axe, Clavicus may dissapear, leaving Barbas in "real dog" form.
360 Sometimes you may not be able to use another beast follower (Dog, Death Hound, or Armored Troll) after the quest is finished because the game thinks Barbas is still following you.