You, Brynjolf and Karliah must pursue Mercer Frey to the ancient ruins of Irkngthand and stop him from stealing the Eyes of the Falmer and escaping with the Skeleton Key of Nocturnal.
You will need to traverse three to four levels to find the entrance since this is a rather large ruin. There is a lever which opens the front gate but it is not strictly necessary to use this as you can simply turn right as you enter, disable the bear traps on the ground, and ascend the stairs to the second level, third level, etc. You can sneak your way in or just walk in and kill everyone who gets in your way. The raised gate in the entrance is just a bluff. There’s a broken part of the wall where you can gain access and work your way around in.
In the first area of the ruin, known as Irkngthand Arcanex, you’ll have to fight off a few Dwarven automatons and avoid a fire trap until you reach the lift leading to the Irkngthand Grand Cavern area.
Upon reaching the Grand Cavern, you’ll find Brynjolf and Karliah waiting for you. They will now act as your temporary followers for the remainder of this quest. Continue onward and you’ll eventually see Mercer in the other side of the ruins. Continue to the next area where you’ll encounter Falmer Shadowmasters. The gate is closed and the only way to open it is to set the two gears rolling. The two levers that activate the gears are found across from one another on the upper level. After activating one, run to the second one immediately since the gears stop automatically after a short while.
On your way, be sure to stop and loot the room with the Detect Life Scrolls. These are useful as Mercer Frey employs invisibility magic when engaged in close combat. Continue to the next large area where you saw Mercer earlier. Kill the falmers and a Dwarven Centurian automaton. Make your way to the path above and it will lead you to the higher ground. Go through the door to reach the Irkngthand Slave Pens.
The Slave Pens is a rather straightforward but narrow area. Fight your way through various enemies until you come to the door leading to the area known as Irkngthand Sanctuary.
As soon as you reach the Sanctuary, you’ll find Mercer trying to remove the Eyes of the Falmer from their statue. Upon noticing you, he will collapse the ledge you’re standing on, and after a brief dialogue, you’ll have to fight him. He will use his Agent of Subterfuge power on Brynjolf, causing him to attack Karliah. This will keep Brynjolf and Karliah out of the fight, leaving just you and Mercer.
He’ll disappear from time to time as part of his combat strategy, but remember that although he can become invisible, he’s never invincible. A faint shimmer of his movement will be visible in the air around you as he moves about while invisible, so use this to locate and attack him with your chosen weapon or spell.
TIP: One quiet easy way to kill Mercer is to climb up to the ledge behind the statue and when he comes at you, use Unrelenting Force to blow him off the ledge, as a fall from this height will kill him instantly.
Once Mercer dies, a pipe at the top of the room will burst, flooding the room. Take the Skeleton Key and the Eyes from Mercer’s body, and wait for the water to rise. Once it gets high enough, a hole will appear in the roof above the statue’s head. Go out through the short passage to escape.
Talk to Karliah to complete the quest, and she will give you her bow.