England, A.D. 932: The cruel and tyrannical Saxon King Freyne summons his young son Einon (Lee Oakes) and Einon's mentor Bowen (Quaid) to witness the suppression of a peasant rebellion. Though the king's troops are ultimately victorious, Freyne is killed when the rebels stage an ambush. Einon rushes into the fray to claim his crown and is accidentally stabbed through the heart before Bowen can reach him.

Though the wound should have been fatal, the young king's mother hopes for a miracle. Queen Aislinn (Christie) has her son taken to a cave in the mountains where she pleads with a shadowy figure to save the young man's life. The creature removes a part of its own heart and bestows it upon the boy, cauterizing the wound with a blast of fire. Grateful for the dragon's sacrifice, Bowen pledges to repay his debt at a future time.

Twelve years later, Einon's (Thewlis) castle is rebuilt and Bowen becomes a formidable dragon-slayer. During one dragon-hunt, the knight meets Brother Gilbert (Postlethwaite), a monk and aspiring poet. Impressed by Bowen's prowess, the priest is determined to follow him and record his heroic exploits in epic verse. The knight stalks another dragon to its cave and engages it in battle, resulting in a stalemate. The dragon (Connery) shrewdly informs Bowen that it is the last of its kind, and that the dragon-slayer will have difficulty finding work. The dragon proposes a partnership, and the two begin defrauding local villages with staged dragon-slayings. Since the dragon's name is difficult for the human tongue to pronounce, Bowen calls him "Draco", after a constellation of stars that resembels a dragon.

In her home village, Kara (Meyer) attempts to instigate a new uprising. When Bowen and Draco arrive the villagers offer the girl as a virgin sacrifice to appease the dragon. At Draco's lair, the dragon and knight argue about what to do with Kara as Einon approaches and demands that she be returned to him. Bowen and Einon duel, with the older man at a disadvantage because he is not truly willing to harm his former student. In the course of the fight, Bowen is heartbroken to realize that Einon never changed: he was always an evil man, and he only pretended to agree with Bowen's idealism to learn the sword.

During the battle between the peasants and Einon's forces- which goes far better than the last rebellion due to Draco's firepower and Bowen's tactical expertise-, the king is shot with an arrow. The resulting pain causes Draco to fall from the sky over Einon's castle and the dragon is captured. Einon realizes that sharing the dragon's heart renders him virtually immortal so long as no harm befalls the dragon, and determines to keep Draco alive and imprisoned indefinitely.

When the rebels invade the castle, Bowen intends to release his friend, but Draco tells Bowen that in order for Einon's reign to end he himself must die, and begs the knight to kill him. Reluctantly, Bowen does so, releasing Draco's soul to the dragons' heaven- where he becomes a new star in the constellation- and killing Einon in the process. The film concludes with an epilogue stating that Bowen and Kara go on to lead the people in an era of peace and prosperity, and that, whenever things are particularly difficult, Draco's star shines all the more brightly, for those who knew where to look.

*This information was taken from the website.