On the war-ravaged planet of Eternia, the malevolent warlord Skeletor (Frank Langella) has taken control of the formidable Castle Grayskull, the epicenter of power in the cosmos. With his armies scattering the remaining defenders of Eternia, Skeletor captures the Sorceress of Grayskull (Christina Pickles), imprisoning her within a draining energy field. His ambitious plan is to wield the universe's dominion by the looming moon-rise.
Skeletor's rivals—warrior leader He-Man (Dolph Lundgren), seasoned soldier Man-At-Arms (Jon Cypher), and his daughter, Teela (Chelsea Field)—manage to rescue the clever locksmith Gwildor (Billy Barty) from Skeletor's minions. Gwildor shares alarming news: Skeletor has seized his invention, the "Cosmic Key," which grants its wielder the power to open portals to any location through musical notes. This device was pilfered by Skeletor's devious aide, Evil-Lyn (Meg Foster), enabling them to invade Castle Grayskull.
Equipped with Gwildor's prototype of the Key, He-Man and his companions prepare to storm the Castle and rescue the Sorceress. However, they are quickly overwhelmed by Skeletor’s forces and are forced to retreat through a hastily opened portal, thanks to Gwildor's invention, finding themselves transported to Earth.
As fate would have it, the Cosmic Key is lost upon arrival, only to be discovered by two Californian teens: orphaned high school student Julie Winston (Courteney Cox) and her boyfriend Kevin Corrigan (Robert Duncan McNeill). While they tinker with the device, they inadvertently send out a signal that allows Evil-Lyn to locate them. She dispatches Skeletor's henchmen—Saurod (Pons Maar), Blade (Anthony De Longis), Beast Man (Tony Carroll), and Karg (Robert Towers)—to recover the Key.
Kevin, mistaking the Key for an avant-garde Japanese synthesizer, takes it to the local music shop owned by his friend Charlie (Barry Livingston). Meanwhile, through a portal, Evil-Lyn’s minions intrude at school, chasing after Julie until He-Man arrives just in time to save her. Forced to retreat, the henchmen return to Grayskull, where an angry Skeletor punishes Saurod for failure and prepares an even larger force to send after He-Man, under Evil-Lyn's command.
As events unfold, He-Man takes a moment to explain to Julie the stakes of their battle against Skeletor, emphasizing that their best chance for survival is to reclaim the Cosmic Key. Back on Earth, Kevin discovers police investigating the mayhem caused by Skeletor’s troops, realizing Julie is missing. He is taken to Julie's home by Lubic (James Tolkan), a detective looking into the situation, but a search reveals no sign of her. Lubic grows suspicious of the Key, which he believes may have been stolen by Kevin, and confiscates it before heading to Charlie’s shop to validate Kevin's story.
In a twist of fate, Evil-Lyn and her henchmen break into Julie's home and use a mind-control collar on Kevin, questioning him about the Key's whereabouts before chasing after Lubic. Just in the nick of time, Julie and the Eternians rescue Kevin from the collar, leading them to Lubic and the Key. They reach Charlie’s store, but the villainous forces of Skeletor catch up, igniting a fierce battle for control of the Key. Evil-Lyn manages to reclaim the Key and calls Skeletor to Earth.
A chain of cat-and-mouse ensues as Skeletor relentlessly pursues He-Man and his allies. In a critical moment, He-Man retrieves the Key from Evil-Lyn, but unfortunately, Skeletor’s forces manage to capture the Eternians. In the ensuing chaos, Julie is injured by Skeletor’s lightning strike, which simultaneously erases the Key's stored destination.
In a desperate move, He-Man surrenders himself to Skeletor to save his friends and is brought back to Eternia as a captive. Skeletor revels in his apparent victory, seeking to bolster his power over He-Man, who stands his ground, refusing to be broken. As Skeletor prepares to harness the cosmos' energy, he demands He-Man kneel.
Meanwhile, Gwildor begins repairing the Cosmic Key, and Kevin successfully recreates the musical tones needed to open a gateway back to Eternia. Together, along with Lubic, they make their way to Castle Grayskull, where an all-out battle ensues against Skeletor’s forces. Feeling betrayed as Skeletor hoards the cosmic power, Evil-Lyn turns against him, along with his other minions.
In a climactic confrontation, He-Man claims the Sword of Grayskull, leading to a final showdown with Skeletor. After a fierce clash, He-Man shatters Skeletor’s staff, restoring him to his original form. He offers Skeletor a chance for mercy, but as Skeletor draws a hidden sword, He-Man retaliates, sending him into a deep chasm below. The liberated Sorceress heals Julie, while Gwildor activates a portal to send their Earthling friends home. Hailed as a hero, Lubic opts to remain with the Eternians.
Once back on Earth, Julie awakens on the day of her parents' tragic plane crash. Realizing that the Cosmic Key has transported her back in time, Julie seizes the opportunity to intervene and prevent her parents from boarding the doomed flight. She races outside to find Kevin, who affirms that their extraordinary journey was real, producing a memento from Eternia—a small blue sphere depicting He-Man standing before Castle Grayskull, sword raised high.
In a thrilling post-credits revelation, Skeletor’s head surfaces from the water at the bottom of the pit, vowing, > “I’ll be back!”
