All Dragons of Atlantis players received an official message in-game announcing the release of the Stone Dragon Outpost. The requirements for building a Stone Dragon Outpost (3rd city) are as follows:
Control a plain (I suggest a level 10 which will give you the maximum number of wilderness slots)
Already occupy a Water Dragon Outpost
Be level 9 or higher
Find a Stone Dragon Egg
Stone Dragon Eggs can be found from Level 7 Hills. I will be farming mine tonight and posting an update soon. I will also put together a guide on Hubpages that takes you step by step through farming your Stone Dragon Egg and also setting up your Stone Dragon Outpost.