The book begins with the return of a group of friends, consisting of Tanis, Sturm, Caramon, Raistlin, Flint, and Tasslehoff, who had separated to pursue their own quests and pledged to return in five years. Kitiara Uth Matar, the half sister of the twins Caramon and Raistlin, was supposed to be there as well, but only sent a mysterious note.
On the eve of their reunion, the Companions discover that the village where they are meeting has been taken over by a religious order called the Seekers. They are collaborating with the Dragon Highlords, who are preparing for the conquest of the continent of Ansalon.
The Companions soon discover that the Seekers are searching for a Blue Crystal Staff. When Goldmoon, a plainswoman in the same pub as the companions, heals a Seeker with her staff, the Companions are confronted by Highlord forces and are forced to flee the village.
The next day, the group is attacked by Draconians, reptilian creatures that serve as foot soldiers in the Highlords' army. The Companions are driven into the woods, where they are attacked by undead and rescued by a centaur. The group is charged to go to the ruined city of Xak Tsaroth to retrieve the Disks of Mishakal, an object containing the teaching of the True Gods that will be instrumental for the restoration of the faith in the True Gods.
After a lengthy trip on the backs of pegasi and several encounters with the forces of darkness, the companions enter Xak Tsaroth and meet some gully dwarves, diminutive and stupid creatures. One of the dwarves, Bupu, leads them to the dragon Khisanth, who is killed by the holy power of the Blue Crystal Staff. When this happens, Goldmoon is consumed by its flame and presumed dead. However, they later find her resting at the foot of a statue of Mishakal (the Goddess of Healing), which now bears the Blue Crystal Staff, and Goldmoon is blessed with true clerical powers. The Companions leave with the Disks of Mishakal. Bupu gives an ancient spellbook (formerly belonging to the archmage Fistandantilus) to Raistlin. When they return to the village to regroup they find it occupied. The Companions are captured by the Highlord armies and are chained in a slave caravan along with an elf named Gilthanas, the son of the leader of the elven nation of Qualinesti.
The group is freed by Gilthanas's brother, Porthios. They flee to Qualinesti, where Tanis is reunited with his childhood sweetheart, the exceptionally beautiful elven princess, Laurana Kanan. Laurana is still in love with Tanis and wants to marry him, but Tanis breaks her heart by telling her he is now in love with Kitiara.
The Elven King Solostaran convinces the Companions to lead an attack on the slave-mine Pax Tharkas to free the slaves from the control of the local Dragon Highlord. The Companions journey through a secret passage underground to Pax Tharkas and devise a plan to free the slaves. Laurana, desperate to win Tanis back, secretly follows the Companions. When Tanis discovers Laurana has followed them he angrily rebukes her for acting like a spoiled child. Laurana resolves to try to prove she is more than that.
The Companions infiltrate Pax Tharkas and Goldmoon heals Elistan, a dying Seeker, and converts him to the faith of the true gods. He becomes the first cleric of Paladine, and Goldmoon turns the Disks of Mishakal over to him. The Companions help the slaves break free. Laurana proves her worth in the battle by fighting bravely. The Dragon Highlord Verminaard and his red dragon Ember arrive to crush the revolt, but the insane red dragon Flamestrike kills Ember, while the Companions cut down Verminaard. A mysterious figure called "The Everman” later appears at a celebration following the freeing of the slaves, but flees after being spotted.
According to Tracy Hickman, "The restoration of truth and faith are... to a great extent, the theme of this first book in the series."