The movie takes place fifty years before the game. Alteria is a land divided among humans, elves, beasts, and dragons. Decades ago, the elves and humans drove the beasts and dragons back into the Dark Mountains. Evil thrives on darkness and draws strength from it. Rage and fury gather in the gem possessed by the Black Dragon Karas, waiting for the dragon to reawaken.
In recent years, humans and elves have been fighting for territory. And because of this, they cannot see the common enemy and the greater evil coming their way. No one but the Elf Princess Nerwin can see the growing storm and thinks Alteria’s only hope is to forget the past and ally with the humans. She has decided to act on her own in secret – a courageous but foolish act.
Meet Lambert, a human who has a run-in with some beasts before being rescued by Barnac from his ship. Aboard the ship, he meets Barnac, the famous mercenary; Geraint, the famous dragon fighter; and Argenta, Geraint’s sister.
They stop in the kingdom of Saint Haven, govern by the human king, where Lambert finds and rescues Liya, an elven archer under Nerwin. Then the beasts Lambert encountered earlier, return. The beasts are defeated by Velskud of the Imperial Knights. Back in the castle of Saint Haven, Nerwin tries desperately to convince the human king to ally with the elves but it ends in vain. But when Velskud brings him a beast helmet and Barnac, Geraint, and Argenta join in the plan for alliance, the king reluctantly agrees.
When Liya sees a shadow near the king’s dining hall, she follows it, along with Lambert. There, they sneak into the dining hall where the king, Terramai (his advisor), Karacule (a very powerful sorceress), Nerwin, Barnac, Geraint, Argenta, and Velskud are having a meeting. They overhear that the dragon’s weakness is the gem in its chest. Legends have it that the gem can kill and revive the dead. Terramai feels the gem should be kept in Saint Haven. An argument over whom and where the gem should be kept breaks out until Lambert interrupts them with his plan. After telling his plan, both Lambert and Liya are kicked out of the room. From outside the door, they hear Geraint tell the group that the gem can corrupt the most innocent of minds so it must be destroyed.
Later that night, Velskud is joined by Princess Elena, who turns out to be the shadow Liya saw earlier. She and Velskud are both behind the plan to get the gem and Velskud becomes the most power king in Alteria’s history. The drunken king tells Velskud to get the gem for himself. He sees Elena and ends up being killed by Velskud.
Under the cover of darkness, Terramai, Karacule, Nerwin, Barnac, Geraint, Argenta, Velskud, Lambert, and Liya travel to the Dark Mountains on the ship. Lightning strikes the ship and while Lambert tries to retrieve the sword that slipped from his hand, accidentally strikes the ship’s wheel. The ship crashes and the group is forced to continue the journey on foot.
Along the way, they are blocked by the ruins of a battle fought between the elves and humans. Elf ghosts are said to inhabit the place and no one should enter. Lambert trips and tumbles into the ruins, forcing them to take the shortest route. The group follows after him and Elena secretly tells Velskud to hurry.
In the ruins, they see ghosts of elves. Liya tells them that the ghosts are crying out for help. They are lost. They are waiting to be free but strong magic is required for their freedom. The group sees a bat of the Dark Mountains, who scouts for the beasts. It tries to slip away to the Dark Mountains but the group manages to kill it.
On their journey, Lambert and Liya develop a romantic interest in each other, and Geraint and Argenta have a secret they can’t reveal. Geraint was able to find the secret entrance of the Dark Mountains, unlike his companions, saying that once someone touches a powerful gem, it becomes a part of you. He finds the handle to open the door and breaks it, while clutching his chest.
Inside, the group is ambushed by beasts. They escape by caving the exit in, but Geraint and Argenta stay behind. While the others are outside, Geraint uses the power of the gem in his chest to awaken a giant beast. They escape and meet up with the group.
Meanwhile, the Alliance and the beasts fight, causing Karas to awaken. The beasts fighting against the Alliance seemingly retreat but ambush Lambert and the group. The group escapes but Liya and Lambert are left behind in the confusion. They fight some of the big beasts. When Lambert was about to get eaten by a beast, Liya uses her last arrow to save him, sacrificing herself. In his rage, Lambert slays the beast that killed her. As he hugs her body, his cry causes the beasts around him to fly far. The others hear him and race to him, while attacking the beasts along the way. They are quickly overrun so Geraint uses his secret power to transform into a Gold colored Dragon. It turns out that his power comes from the gem on his chest, much like Karas. He kills many beasts and accidentally hurts Karacule in the process. The group, seeing his dragon side, starts to distrust him, saying that dragons need to be killed and to never trust them.
Karas shows up and Geraint is injured fighting him. Argenta is also revealed to have a gem on her chest.
When Geraint and Karas fly over Lambert, he notices the glowing gem on Karas’s chest. Lambert remembers what was said about the gem and decides to get it for Liya. The group is seen panicking about Karas while Lambert scales the dragon to its chest. Then the group helps Lambert in getting the gem.
Geraint, while in Gold Dragon form, lures Karas into a narrow ravine. Karas’s wings cut the sides of the ravine, causing giant rocks to come hurling down on him. Karas crashes under the rocks but this was not enough to kill him. Geraint and Karas fight and when Karas was about to eat him, Argenta uses the power of the gem on her chest to transform into a Silver colored Dragon. She shields Geraint from a blast by Karas, only to injure herself in the process.
While Geraint distracts Karas, Terramai and Karacule combine their powers onto Nerwin’s arrow. When she fires it, Barnac and Geraint combine to its effect, hitting Karas directly in its face. Geraint uses the opportunity to attack the gem, and with Lambert’s help, pulls the gem out.
Then Geraint and Lambert dispute over who gets to use Karas’s gem. Geraint gives Lambert his gem, causing Karas’s gem to take effect on Geraint’s body. Lambert uses Geraint’s gem on Liya’s body before she become’s an elven ghost. Velskud trudges to Geraint, where he injures Geraint’s eye and steals the gem. Velskud reveals his plan to rule the world and tells them what the drunken king said. He even said that Elena was also involved in the plan and that he killed the king.
Before Velskud was about to kill Geraint, Lambert threw his sword, preventing the final blow. Lambert did not use Geraint’s gem but instead returns it to his chest. Velskud accidentally absorbs Karas’s gem into his body due to strike by Lambert’s sword and before he could transform, Lambert strikes his sword through Velskud’s chest, with the help of an elven arrow. Velskud admits that Geraint was right all along about the gem’s power and stumbles down into the ravine. Liya’s soul is revealed to have not left her body. When Lambert sees her, they kiss.
The Alliance arrives and they hitch a ride on an elf ship, much to Barnac’s dismay. Elena sees what happens and is seen holding the gem, showing that many things will happen in the future.
After the end credits, Lambert reunites with his dogs – Number 1 and Number 2. He renames Number 1 to Bow and Number 2 to Arrow.