Level 4
SpoilerShow
On level 4, within the section Trails of Thought, you will first need to pass through the pressure plate/teleporter puzzle room. The second puzzle, the 3 pits controlled by the 3 pressure plates, contains the secret. Stand on the middle pressure plate and face the wall ; you will find a button here. Turn back around and go back into the hallway you just came from, and the wall to your right will have just opened up, revealing the dagger.