Oblivion:Nocturnal

Quick Walkthrough
# Once you have reached level 10, approach the shrine, and you'll be asked to recover the Eye of Nocturnal from a pair of thieves.
# Ask around Leyawiin to find out that the thieves are Argonians living in town.
# Locate the thieves, and speak to them. You will receive a quest message instructing you to eavesdrop on their conversation.
# Overhear their discussion to learn the Eye is in Tidewater Cave. Recover the artifact, and return it to the shrine.
# Upon your return, you are rewarded with the Skeleton Key.

Detailed Walkthrough
Locating the Shrine of Nocturnal
thumb|right|Oblivion:Eye of Nocturnal|Eye of Nocturnal in Tidewater Cave, suspended above a chest
Nocturnal's Shrine is located off the Yellow Road north of Leyawiin, just past Blankenmarch. On the in game map, it is due west of the words County Leyawiin. Optionally, you can add a map marker to your map by talking to Alves Uvenim in Leyawiin Mages Guild (topic "Daedra shrines"; you must have already read Modern Heretics or have spoken with Ulene Hlervu about "Cheydinhal"). You need to be at least level 10 to start this quest. When you approach the shrine, you will be asked to recover the Eye of Nocturnal from a pair of thieves that are hiding out in Leyawiin.
:Night among strangers. Secrets in the dark. Nocturnal is here. But my Eye is blind and drowned, stolen from its shrine, and hid in dark waters. To steal from a god is most unwise. In Leyawiin, two Argonians think themselves secret, but the Eye has seen them. Find these thieves in the city that spans the waters. Learn where they hide my Eye. Retrieve the Eye of Nocturnal, mortal, and return it to me, and I shall look favorably upon you.
The Task at Hand
After talking to people in town, guards being most helpful (use the topic "Leyawiin", not "Eye of Nocturnal"), you discover the thieves are a pair of Argonians living in town (Bejeen and Weebam-Na). A brief discussion with the thieves themselves will get you a quest message, asking you to eavesdrop on the pair to discover the location of the Eye. Sometimes you must leave and come back before they begin to talk. The best option is to sneak into their house and wait out of sight: if they realize that someone is listening to them they will stop talking.

They reveal the Eye is hidden somewhere called Tidewater Cave, where the resident trolls act as the perfect guards. The cave is located on the coast of Topal Bay, to the south-southeast of Leyawiin and can be moderately tough; it's heavily populated with Kalperklan Trolls as well as leveled animals, and has two Azhklan Trolls outside.  The eye is pretty easy to find. Take a left at the first intersection, then another when that path dead ends, and then one more. The eye is underwater, behind a leveled chest, but is so large and glowing it's hard to miss.

Returning to the Shrine
Return the eye to the shrine, and Nocturnal will give you the Skeleton Key and increase your Fame by one point. The Skeleton Key is an unbreakable and ever-lasting lock pick that boosts your security skill by 40 points whenever it is in your inventory.
:My Eye is returned, and I once again see into the darkness that is your world. We mock the thieves, for bitter is their loss. You, mortal, may take this. It shall open the secrets of dark places for you.

Notes
The map marker will point to Tidewater Cave as soon as you speak to either of them, rather than needing you to successfully eavesdrop.
You can go straight to the cave after receiving the quest and find the eye there without going to Leyawiin at all.
If desired, you can simply kill the thieves then go to Tidewater Cave—Nocturnal doesn't care if you commit murder. It should be noted that this will make Mazoga the Orc's quest impossible to complete if not finished already.
The Eye of Nocturnal can be duplicated using the skull of corruption bug, however, the game will crash if you attempt to fast-travel directly back to the shrine while having one copy in your inventory and leaving the other copy in the body of the corrupted clone at the same time. Fast-traveling anywhere else will not cause the game to crash, allowing the player to finish the quest. After finishing the quest, the copy of Eye of Nocturnal can be obtained back from the corrupted clone's corpse, which is possibly the only way to keep it after the quest has been finished. The Eye will, nevertheless, remain a quest item, stuck in your inventory.
The ID of the new copy can be found using console: first type "save savename 1" to your console, pressing enter will make the game create a save called "savename", which can be found in your Oblivion directory (default My Documents\My Games\Oblivion), there you'll find a .txt file with the same name, open it and seek for "eye of nocturnal" in the "misc" category, once you find the ID, simply use the command "setquestobject ID 0", which will make it possible for you to drop the copy. Opening the .txt file is recommended by using wordpad.

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