The Empire of Izmir has long been a divided land, ruled by the Mages, an elite group of warlocks. In the capital of Sumdall, an evil mage named Profion creates a magical sceptre that can allow him to control Gold dragons, but his attempt to control a captive one fails, and he is forced to kill it. As he begins to make new plans, the dragon bleeds into the nearby river, causing it to catch fire, which many inhabitants notice, including a pair of teenage thieves, Ridley and his best friend Snails.
Later, Profion and the Council of Mages discuss the controversial views of Empress Savina, who wants to give rights to non-mages in Izmir. When the Council threatens to confiscate from her the scepter that allows her to control Gold dragons, she decides to seek the Rod of Savrille, which controls Red dragons. Profion learns of this and decides to take the Rod himself. Meanwhile, Ridley and Snails break into the Sumdall magic school to steal valuables and other items, but are discovered by the young Mage Marina. She is distracted when the library wizard is held hostage and interrogated by Profion’s assistant Damodar for information on the map to the Rod. After refusing to talk and sending the map to Marina, Damodar kills him, and Marina travels through a portal to escape, taking the thieves with her. After crashing into a pile of garbage, they meet a dwarf named Elwood, who ends up joining the three’s escape through the sewers.
Damodar puts a price on Marina, Ridley, Snails and Elwood’s heads and after letting Profion know that the group got away with the map, Profion creates a tentacled monster inside Damodar which controls his body. The group hide inside a tavern and read the map that Ridley and Marina get sucked into. Damodar and his minions attack Elwood and Snails, but they escape with the map. Ridley and Marina exit the map and all decide to work together to find the Rod. They must first find a ruby called the “Eye of the Dragon” that can open the door to a tomb containing the sceptre. The Eye is held by the thieves’ guild in the city of Antius, whose leader, Xilus, promises to give the group the “Eye of the Dragon” if Ridley solves a maze puzzle of traps. Ridley retrieves the “Eye of the Dragon” when Damodar suddenly arrives to capture him and his friends. Marina is captured instead while Ridley, Snails and Elwood escape, meeting an elf named Norda who works for Empress Savina, whom she informs about Profion’s plan to obtain the Rod. In his castle, Damodar interrogates Marina and uses the tentacles in his mind to gain her knowledge.
Ridley and Snails break into Damodar’s castle to rescue Marina, while Norda and Elwood stay behind. After Ridley and Snails decide to split up, Ridley finds and rescues Marina, but Snails is confronted by Damodar after he finds the map and a fight ensues between the two with Damodar gaining the upper hand. When Ridley and Marina arrive, Snails throws the map to his comrades before Damodar kills him and throws his body off the castle. Ridley becomes enraged over the death of his friend and attacks Damodar, but he disarms him and stabs Ridley with his own sword. In the confusion, Marina grabs some magic dust and creates a magic portal to escape with Ridley. Meanwhile, during a Council meeting, Profion and Savina’s factions decide to battle for control of Izmir using magic.
At the same time, an elf heals Ridley along with Norda’s soldiers. Later, Marina tries to help Ridley get over the death of Snails, but Ridley furiously scolds her. After a brief argument in which Marina convinces Ridley that Snails didn’t die in vain, the two forgive each other and become love interests. Ridley later uses the “Eye of the Dragon” to enter the tomb that contains the Rod. It is held by a skeleton that comes to life and tells Ridley he is Savrille, now cursed for trying to control red dragons, and “Anyone who wields the power of the Rod shall suffer a horrible fate”, but Damodar arrives to steal the Rod.
Damodar returns to Sumdall with the Rod, where the Empress and her Gold dragons are battling the Mages following Profion below, to bring it to Profion, but Ridley and his friends follow in pursuit. Profion removes the monster from Damodar’s body and uses the Rod to summon Red dragons, which battle the Gold dragons and slowly begin to win the fight. Ridley comes across Damodar, duels him with his new magic sword and then kills him before hurling his body off the castle wall. He then attacks Profion, who disarms him and shoves him back. Ridley’s companions arrive and fight Profion one at a time. Ridley picks up the fallen Rod, and uses it to stop the red dragons. Marina encourages Ridley to use the Rod to bring Profion down, but Ridley, realizing the Rod’s power will corrupt him, refuses and destroys it. Empress Savina arrives and condemns Profion, who fights her with powerful magic, but she summons a Gold dragon which devours Profion, thus ending the battle.
Ridley later visits Snails’ grave with Norda, Marina and Elwood and pays tribute to his fallen comrade. When he places the “Eye of the Dragon” on the grave, Snails’ name disappears, and Norda tells Ridley not to question his abilities. Norda then uses the “Eye of the Dragon” to transport Ridley to another place in the world where “your friend awaits you”, along with herself, Marina and Elwood.