Given the response in your comments, I would recomend breaking the scene into three chapters (A, B, and C. The names are to lessens the confusion of numbering the chapters). The storyteller's story is called a "Story within a Story" (SWS for ease of writing).
Chapter A and C will serve as prolog and epilog to the SWS setting up the scene of the characters discussing the story. It's important that Chapter A ends with dialog from the Storyteller and Chapter C begins with the same dialog. While it's not a chapter book, the set up for the Lorax is done in this style, with the young boy who wants to hear the Onceler's story. At the start of the book, the boy is trying to get the Onceler to tell the story of what took place. He begins with something along the lines of "A Long, Long Time ago" the page is turned and his dialog is now the narration (it even takes on first person from the second or third person of the narrative up to this point). At the end of the Onceler's story, we are brought back to the present (bold added for emphasis):
And all that the Lorax left here in this mess was a small pile of rocks, with one word... UNLESS. Whatever that meant, well, I just couldn't guess. That was long, long ago.
At this point, the story's third person narrator resumes and the coda or epilog of the Onceler's story is given (here the Onceler shares the meaning of the tale with the boy listening to him and it's intended lesson).
The middle part where the SWS is told is the core of the book, however, and needs to be transitioned into properly for the framing device of a kid listening to a story from an old hermit to have true meaning. For a chapter book, this would be your B Chapter, which tells the story in a narrative voice fitting of the storyteller character (if he's having a flash back, switch from third to first person. If it's a fable like he's telling the "Tortise and the Hare" keep it third person. When the SWS is ready to end, bring our audience back to the main story verse by transitioning back to the Moral of the story being told by the narrator (If the "Tortise and the Hare" then the Chapter B ends with a line about the Tortise crossing the finish line first. Chapter C opens with the storyteller saying in dialog "The moral of the story is..." and bring the scene back to the setting we left him in.