The game is set in the world of Erdrea, and begins as the kingdom of Dundrasil is invaded and destroyed by an army of monsters. The protagonist, an infant during the attack, is among those who attempt to escape, but becomes separated and ends up floating down a river and is found by an old man known as Chalky in the village of Cobblestone. Being adopted by his daughter, Amber, the protagonist is then raised in the village. As a teenager, he eventually participates in a coming-of-age tradition by climbing the mountain Cobblestone Tor with his childhood friend Gemma. During the trek, they are attacked by monsters and while fighting to protect Gemma, a mark on his hand glows, allowing him to summon lightning to defend themselves.
Upon returning, Amber reveals the truth to him about his birth and adoption, and sends him to meet king Carnelian of Heliodor. However, upon meeting him and his royal knights Sir Hendrik and Sir Jasper, the protagonist is thrown into the kingdom's dungeons under the accusation that he is the Darkspawn, a evil being predicted to destroy the world. Once imprisoned, he meets a thief called Erik who recognizes the mark on his hand, calling him the Luminary, a legendary hero chosen by the world tree Yggdrasil to save Erdrea from evil, and says he was fated to meet up with him. The pair then escape by using a tunnel Erik dug, and evade capture from Hendrik and Jasper. In a town called Hotto, the pair meet two mages who hail from the city of Arboria: Veronica, who fell into a curse that transformed her body into that of a child's, and her twin sister Serena. The two immediately recognize him as the Luminary and swear their allegiance to him, as is their sworn duty. The four then set on a quest to reach Yggdrasil so that the Luminary can understand more about his destiny. On the way, they gain three other companions: Sylvando, a traveling entertainer, Rab, former king of Dundrasil and the protagonist's grandfather, and Jade, exiled princess of Heliodor who helped the infant protagonist escape during the attack of Dundrasil.
The party eventually arrives at the heart of Yggdrasil, which contains the Sword of Light, the Luminary's destined weapon. However, just as the Luminary is about to take it, he and the party are intercepted by Jasper, Carnelian and Hendrick. It is then revealed that Carnelian was possessed the entire time by an evil being known as Mordegon, otherwise known as the Lord of Shadows, and that Jasper has been an agent of his. The two then subdue Hendrik and the Luminary's party, with Mordegon taking and corrupting the Sword of Light and absorbing the heart of Yggdrasil for himself, destroying the tree and plunging the world into an age of darkness. Separated from his companions, the Luminary is revealed to have been rescued by mermaids from the underwater kingdom of Nautica, where he learns that since the fall of Yggdrasil, Mordegon sent his forces to terrorize Erdrea.
Upon leaving Nautica, the Luminary returns to Cobblestone, now turned into a fortified refuge for Heliodor citizens led by Carnelian and Hendrik, who apologize to the Luminary for all the troubles they caused him. Hendrik then joins forces with the Luminary, and together, they reclaim Heliodor from Mordegon's forces, which brings back the sun. On their journey to save other parts of the world, they reunite with the rest of the party except for Veronica, where they discover that she perished saving the others during the fall of Yggdrasil. At Arboria, the party learns about a huge flying whale, called Cetacea. Using it, they travel to an ancient floating island known as Havens Above, where they discover the means to forge a new Sword of Light. After forging it, the party eventually take to Fortress of Fear, Mordegon's flying fortress. There, the party defeats Jasper, who has turned into a demon, and Mordegon himself, which restores Yggdrasil and the world. A few days after their victory, the party gathers at Arboria to celebrate and pay their respects to Veronica. Following that, the party investigates some mysterious ruins, where they discover an ancient relic that gives them access to the Tower of Lost Time. At the tower, the Luminary is told by the Timekeeper, the spirit who guards the tower, about the opportunity to go back in time to save Veronica and all others who had died during the fall of Yggdrasil. Making the tough decision to leave his current party, the Luminary does so, and defeats Jasper and Mordegon before he has a chance of stealing the Sword of Light and Yggdrasil's heart again.
