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Quest Items are Items that cannot be traded with other players and with NPCs. They are needed for completing quests. Sometimes you must give a Quest Item to an NPC that asks for it, for example the Horadric Malus for Charsi (which would complete the related quest), sometimes you have to do other things as is described by the NPC that gave you that quest, for example putting the Horadric Staff on the Orifice near Tal Rasha's Chamber. It doesn't always complete the quest, but brings you closer to the completion.

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