NY 38 proceeds out of Freeville, passing over Fall Creek and heading north along Groton Road through a lightly populated area of the town of Dryden. The route passes by a mixture of open fields, forests, and isolated homes on its way to the Dryden–Groton town line, where it meets the southern terminus of NY 34B southeast of the hamlet of Peruville. NY 38 parallels the Owasco Inlet into Groton and the village of the same name, becoming Peru Road at the southern village line. It continues north, following South and Main Streets through the densely populated village to an intersection with NY 222's western terminus at Cortland Street. At this point, NY 38 becomes Cayuga Street and winds its way northward along the Owasco Inlet and out of the village. Now known as Locke Road, NY 38 heads the northwest through another rural, largely undeveloped area into Cayuga County.