Young Kayley (Sarah Freeman) and her mother Julianna (Jane Seymour) see her father Lionel (Gabriel Byrne) off to Camelot for a meeting with King Arthur (Pierce Brosnan) and his Knights of the Round Table, Kayley expressing to become a knight when he promises her a trip to the kingdom someday. However, a dark-hearted knight named Ruber (Gary Oldman) becomes upset at his share of the land's divisions and attacks Arthur with a mace to usurp him. The knights repel Ruber's attack, but Lionel is killed before King Arthur defeats Ruber with his sword Excalibur. Despite her father's death, Kayley (Jessalyn Gilsig) grows into a young woman, dreaming of her chance to prove herself and become a knight like her father, much to her mother's chagrin who believes it to be too dangerous for her.
Ten years later, a Griffin (Bronson Pinchot) breaks into Camelot and steals Arthur's sword, subsequently being attacked by Ayden (Frank Welker), a silver-winged falcon owned by Merlin. The resulting conflict causes the griffin to lose the sword in the Forbidden Forest as he escapes. Upon King Arthur learning from Merlin (John Gielgud) that Ayden has gone into the Forbidden Forest to look for Excalibur while having his wounds healed, he has a horn blown that notifies the lands that Excalibur has been stolen. The next night, Ruber breaks into Julianna's home and kidnaps Julianna and Kayley, plotting to use them to sneak into Camelot and overthrow Arthur by using a magic potion (which he obtained from some witches) which combines his soldiers and a chicken dubbed Bladebeak (Jaleel White) as a demonstration with various weapons and instruments of destruction. Kayley manages to escape and goes to the forest in search of the sword, Bladebeak being ordered to follow her and report her location to Ruber. While there, Kayley meets Garrett (Cary Elwes), a blind hermit who has learned the ways of the forest and survives with ease with the assistance of Ayden. Despite his initial objections, Garrett allows Kayley to help him recover Excalibur. Coming across Dragon Country, the pair meet a conjoined twin dragon; the sophisticated and intelligent Devon (Eric Idle), and the crude but loyal Cornwall (Don Rickles) who are bullied by the other dragons due to their smaller size and their inability to spit fire or fly. With their help, they manage to escape a dragon attack and a chase by Ruber who has caught up to them. Over the course of their adventure, Kayley teaches Garrett to rise above his pain from the past when she mentions Sir Lionel. Garrett tells her that long ago, he was accidentally blinded by horse in a fire at Camelot, but Sir Lionel trained him.
Soon they come across the belt of Excalibur in the footprints of a giant ogre, but Kayley's insistence on questioning Garrett causes him to miss a key signal by Ayden and he is injured by Ruber. Ruber and his party are delayed by moving trees, allowing the pair to escape. While tending to his wound, Kayley and Garrett develop an attraction toward one another as the magic of the forest heals him. After they find the scabbard of the sword, they trail Excalibur to a giant Rock ogre using it as a tooth pick they manage to steal back the sword use the ogre to again delay Ruber's attempts to overtake them. Exiting the forest with Excalibur, Garrett gives it to Kayley to turn in herself, no longer feeling a part of that world. He returns to the forest with Ayden and Kayley is captured moments later by Ruber and his thugs as she tries to go back for Garrett. Ruber uses the potion to meld Excalibur to his own arm and using Kayley as a bargaining chip, Ruber forces Julianna to gain them entry to Camelot. Devon and Cornwall inform Garrett of this and he rushes to rescue her. Once inside Camelot, Kayley frees herself (with the help of Bladebeak) to warn them and a fight breaks out. Garrett, Devon and Cornwall arrive and assist, Cornwall and Devon finally learning to work together find out how to fly and quickly turn the tide of the battle in their favor where they fight off the Griffin after rescuing Ayden from being attacked.
Confronting Ruber who tries to kill an injured Arthur, Kayley and Garrett manage to defeat Ruber by tricking him into stabbing the sword into the enchanted stone from which it was pulled. The conflict of magic from the enchanted stone destroys Ruber, disintegrating him, and heals those injured in the fight as well as returning Ruber's minions, Bladebeak and Excalibur to normal. Cornwall and Devon are separated, but decide to rejoin in their reignited friendship. Afterwards upon pulling Excalibur out of the stone, King Arthur realizes that the strength of his kingdom is not in the strength of its king alone, but the strength of its people and he knights both Kayley and Garrett for their valor. Afterward, Kayley and Garrett dance at their knighting ceremony and share their first kiss, which signifies at a strong and close blossoming romantic relationship before they ride off on a horse with "Just Knighted" as a sign on the back as the pair of them ride off together.