The story begins when Dart, the protagonist, is heading home from a 5 year long journey to pursue the black monster, who killed his parents and destroyed his birth city: Neet. On the way, he is attacked by Feyrbrand, a dragon controlled by the Sandora, a rebel faction in the Serdian civil war. After Dart gets hit by the dragon, he gets saved by a mysterious female heroine named Rose, though they soon part ways. When he arrives at his hometown, Seles, he discovers that it has been destroyed by Sandora, and that Shana, Dart’s childhood friend (and later in the game, his love interest), has been taken away. Dart sets out to rescue her. Throughout the game, he is periodically joined by people that he helps along the way.
After rescuing Shana from Hellena prison with the help of the recently escaped: Lavitz Slambert, King Albert sends the party to defend the fort-city of Hoax against attacks from Sandora. Among the attacking Sandora is Kongol, the last survivor of a race of giants known as the Gigantos. It is in his battle with Kongol that Dart first gains his ability to transform into a Dragoon using the Dragoon Spirit of the Red-Eyed Dragon with the help of Rose. Kongol is injured, but survives and retreats. With the fort safe, they travel to the city of Lohan. In the city, they meet a man named Lloyd in the Heroes Tournament, supposedly the greatest swordsman in the world. Later they discover that he kidnapped King Albert and took the Moon Gem from him, an ancient artifact held by the Royal Family. Lavitz desperately tries to save King Albert, buts gets killed by Lloyd's Dragon Buster, a sword created by the Winglies to kill Dragoons. The king is rescued, but Lloyd gets away with the Moon Gem.
They soon discover that Lloyd is gathering other artifacts held by human kings since the days of the Wingly Empire, and at the same time, causing disasters in the lands that he visits. While the party tries to reverse Lloyd’s work, Lloyd manages to obtain all three of the artifacts, and also obtains the Dragoon Spirit of the Divine Dragon, the most powerful dragon in the world. Dart and the party finally manage to defeat Lloyd, who then agrees to take them to Emperor Diaz, ancient Emperor of Gloriano during the Dragon Campaign. Emperor Diaz reveals several things to the party.
During the height of the Wingly Empire over eleven thousand years ago, a creature called the Virage Embryo, also known as the God of Destruction, came to the world to end all other life. Before it could be born, the Winglies used their magical power to separate its body from its soul, making it unable to destroy them. They then cast the body into the sky, where it became the Moon That Never Sets, and sealed it using several magical Signets, one in each of the ancient Wingly cities, to prevent the soul and body from reuniting. The soul of the God of Destruction was originally placed inside the Crystal Sphere, which was worn by the ancient Wingly ruler Melbu Frahma to increase his power. However, during the Dragon Campaign, when the Dragoons assaulted Kadessa, the capital city of the Ancient Winglies, the Crystal Sphere was shattered during the fight between Melbu Frahma and Zieg Feld, leader of the Dragoons.
Ever since, the soul of the God of Destruction has wandered the Earth and, every one hundred and eight years, possesses the body of a human child in an attempt to return to its body. The body can be summoned if the Signets are destroyed, which can be done using the immense magical power contained within the artifacts that Lloyd gathered, called the Divine Moon Objects. At this time, the human that is the soul of the God of Destruction is Shana. Emperor Diaz then reveals himself to be Zieg Feld, Dart's father and leader of the Dragoons that fought alongside Rose in the Dragon Campaign. After Zieg defeated Melbu Frahma, Melbu cast a spell that both petrified him and kept Melbu's spirit alive within Zieg's body. Finally, it is revealed that Rose is the Black Monster that destroyed Dart’s village, in an attempt to kill the person carrying the soul of the God of Destruction.
After all this is revealed, Zieg (or, more accurately, Melbu Frahma, who is now possessing Zieg's body) takes Shana away and proceeds to destroy the remaining three Signet Spheres that seal the Moon That Never Sets, the flesh of the God of Destruction, causing it to fall from the sky and land on the Divine Tree. He then carries her to the body of the God of Destruction, so that the body will sense the presence of its soul and prepare to restore itself. Instead, Melbu Frahma unites with the body himself, taking the form and power of the God of Destruction. Zieg is released from Melbu Frahma’s possession, and aids the party in their attempt to defeat Melbu. The party defeats him, but at the cost of Rose and Zieg who sacrifice themselves to destroy Melbu Frahma. Everyone else is able to return home to live their own lives.