The Lord of Darkness (played by Tim Curry) is deep within his chamber, scheming with his minion, the goblin Blixx (portrayed by Alice Playten). He reveals a dark ambition — to extinguish the light of the last two unicorns, ensuring that darkness reigns over the world and allowing him to leave the cave that protects him from the sun's harmful rays. He entrusts Blixx, along with his companions Pox (Peter O'Farrell) and Blunder (Kiran Shah), with a sinister mission: to ensnare the unicorns using their only vulnerability — an innocent heart like that of Princess Lily (played by Mia Sara), who can attract these sacred creatures.
The narrative shifts to Princess Lily, a vibrant spirit full of innocence and playful mischief, venturing toward an enchanted forest. En route, she visits her kind-hearted friend Nell (Tina Martin), who warns her against straying too far into the woods. Nevertheless, Lily's heart is set on reuniting with her beloved, Jack (played by Tom Cruise), a young forest dweller and protector of the woodland creatures. Unbeknownst to them, Blixx and his goblin companions follow the unsuspecting couple, knowing their youthful charm will attract the destined unicorns.
Amidst the beautiful glades of the forest, Jack reveals a delightful secret to Lily: the existence of the last unicorns, a sacred couple meant to guard purity and goodness. Ignoring Jack's caution, Lily approaches the magnificent creatures, gently petting one, inadvertently setting them up for danger. Taking advantage of Lily's innocent touch, Blixx strikes, using a poisoned dart to wound the stallion, leading both unicorns to flee into the depths of the forest. Oblivious to the chaos ensuing around them, Jack and Lily share a moment of bliss, only for Jack to express his anger over Lily's disregard for the unicorn's sanctity. Teasing him, she tosses her ring into the water, prompting Jack to dive in for its retrieval.
Meanwhile, Blixx's nefarious pursuit leads to the capture of the dying stallion, resulting in the theft of its magical horn. This act plunges the world into an icy grip, as an unexpected blizzard arrives, sending Lily scrambling for warmth. Making her way to Nell's house, she is horrified to find it frozen. As she hides from Blixx's party, she overhears their boastful confessions, awakening her realization of the role her actions have played in their wicked achievement. She vows to right her wrongs.
Concurrently, Jack stumbles upon a group of mystical beings led by Honeythorn Gump (David Bennent), alongside two dwarves, Screwball (Billy Barty) and Brown Tom (Cork Hubbert), and the enchanting Oona (Annabelle Lanyon), a pixie. They too are disoriented by the unnatural winter. Through careful conversation, Jack admits to taking Lily to see the unicorns, earning Gump’s ire, but their understanding of love eventually leads to forgiveness. Upon finding the wounded stallion, Gump insists that a hero is required to restore order. Jack protests, feeling unworthy, but Gump guides him to a cave where he can find the arms necessary for the battle ahead. Here, Oona surprises Jack with a revelation: she can transform into a beautiful wood fairy.
Separately, Blixx revels in darker pleasures, showcasing the horn's magic to Lord Darkness, who appears via a fiery projection demanding the capture of both Lily and the mare. Upon discovering Lily's approach, the goblins succeed in overcoming Brown Tom and ultimately capture both the princess and the mare, taking them to Darkness's lair. Meanwhile, Jack and his allies become aware of this ominous turn of events and determine to rescue them after a harrowing journey through a perilous swamp, defeating Meg Mucklebones (Robert Picardo) and regrouping.
As they reach Darkness's castle, the stakes intensify. The palace kitchen is filled with potential meals, and Jack's wit is tested as he orchestrates their escape. Finally, Oona’s revelation of her true size sparks tension, yet her only goal remains saving her friends. Meanwhile, she and Jack believe Lily has willingly agreed to marry Darkness, leading to a climactic confrontation where Jack must muster all his bravery.
As the ceremony to sacrifice the mare approaches, Jack and Gump hatch a plan to reflect sunlight into the underground lair using gathered silver platters. Tension escalates as Lily, under heavy seduction from Darkness, appears to collaborate in the dark ritual, but she reveals her true intentions at the critical moment. She valiantly frees the mare while Jack stands ready to confront Darkness, who wields a shocking amount of power.
In an intense showdown, sunlight floods the lair, sending Darkness into disarray. The epic battle culminates in Jack severing Darkness's grip on reality, leading to his downfall into the starlit abyss, leaving the world waiting on the brink of chaos and balance.
As the stallion regains its power with the return of its horn, life in the enchanted realm begins to flourish again. However, Lily remains in a deep slumber. To awaken her, Jack dives into the water once more to retrieve her ring, successfully reviving her with a kiss. Although their love endures, the experience leaves Lily with a newfound understanding of the ancient woods' powers.
As they depart, one last glimpse shows Darkness alive in the uncharted shadows, plotting his eventual revenge. The film's multiple endings leave audiences questioning the nature of love and sacrifice, echoing Jack and Lily's resolved affection, albeit tinged with the bittersweet reality of their contrasting worlds.
