One hundred years after the first film, Damodar survived his defeat by Ridley Freeborn, having been cursed by his former master, Profion, to walk the earth as an undead entity. Driven insane by the curse, he seeks revenge against the kingdom of Izmir, and the descendants of those who defeated him.
After years of searching with the aid of two dark talon lizardfolk shaman, he locates the Orb of Faluzure, an ancient artifact linked to the power of Faluzure, a dragon god imprisoned under Saragasso's mountains. With the Orb's power, he heals the curse, and prepares to awaken the dragon to destroy Izmir.
Lord Berek, a fighter and former captain of the king's guard, now a bored lord of the King, and Melora, his wife, a young mage, investigate reports of poison gas emanating from Saragasso's caves and find the still-slumbering dragon. Researching the threat in Izmir's library, Melora excitedly reports to Oberon, the head of the Mages' Council, that Faluzure was imprisoned three thousand years ago by a powerful ancient civilization called the Turanians, who also created the Orb. While trying to locate the Orb through magic, Melora is cursed by the much-more powerful Damodar, and begins dying slowly.
She hides her illness from Berek, who is appointed by the King to assemble a party of adventurers; small enough to infiltrate Damodar's lair undetected, but strong enough to face their enemies: Lux, a female barbarian, Dorian, a male Cleric of Obad-Hai, Ormaline, a female elven wizard, and Nim, a master thief. Together they resolve to locate the vault of the warlock Malek, a worshiper of the demon Juiblex who was gifted a magical scrying pool known as the Pool of Sight; Berek believes the pool will allow them to penetrate Damodar's defenses and reveal the orb's location.
The party sets out to locate Malek's Vault, while Oberon and the other mages try to decipher the tomes of Turanian magic in their library, to find a way to defeat the dragon.
While traveling through a haunted forest, Berek's party catches the attention of the powerful lich Klaxx the Maligned, who offers his services to Damodar. Damodar does not trust him, but is confident that the Orb makes him more powerful than Klaxx.
After losing Dorian, Berek's party finds its way to Damodar's castle. Confronting him, Berek manages to take advantage of his overconfidence and steal the Orb, though Ormaline and Nim are badly wounded before the wizard teleports them to the Temple of Obad-Hai. While Ormaline and Nim are treated by the clerics, Berek rides back to Izmir, Lux staying behind to delay demons summoned by Damodar.
Using his shape-changing abilities, Klaxx infiltrates Izmir's castle, kills Oberon in his bath, and assumes his shape. When Berek returns with the Orb, Melora uses it to unlock a vault discovered beneath the castle, where the Turanians hid the secrets of their magic. Klaxx reveals himself, stealing the Orb back and kills the King, the new captain of the guard, and many of the castle's inhabitants, before returning the Orb to Damodar. Falazure awakens and destroys the Orb, regaining his godly power. Damodar asks Falazure to witness the city's destruction and rule over its remains as Falazure's servant; the dragon god agrees, but demands Damodar sacrifice 100 people every new moon in honor of Falazure's release.
While Berek rides in pursuit, Melora, who is near death, manages to decipher the Turanians' secret and rally the remaining mages in a magical attack that defeats the dragon.
Berek and Lux meet up and confront Damodar, who no longer has the Orb's power. They force him to cancel Melora's curse. Klaxx, who has no interest in helping Damodar, disappears with a laugh.
In the aftermath, Izmir is rebuilt, with Berek immersed in his ministerial duties, and Melora appointed as the new head of the Council of Mages. Lux, Ormaline and Nim are shown to have fully recovered from their wounds.
Damodar is imprisoned in a dark dungeon beneath Izmir, but smiling to himself as if he is fully prepared to wait another hundred years to have his revenge.
Unlike the first film, which could be considered medium-budget, this is a low-budget production with a cast of relative newcomers (with the exception of Bruce Payne as Damodar). The film also differs from its predecessor in that many details from the Dungeons & Dragons role-playing game have been included. The professions of the five adventurers are accurately depicted and they work together, each utilizing their individual strengths. The equipment of the adventurers are items familiar from the game (such as the gem of true seeing, flask of purple worm acid, vorpal sword, ring of the ram, staff of lightning, and mace of thunder). The spells cast by wizards are accurate renditions of the ones from the roleplaying game, in that spells are not cast at will, but must first be memorized and in limited numbers.
The villains have also been designed closely to the D&D canon. As part of the bestiary, one can find an aggressive white dragon, darkmantles, spectres, magmins, lizardfolk (one can be seen restoring Damodar's arm), and a lich. Special mention must be given to Klaxx the Maligned (the lich), who is behaving how a lich should according to common D&D behavior—staying close to the action for a potential piece of power or knowledge to grab, but not exactly taking any risk. He also has little loyalty or respect for Damodar, but acts subordinate until such a point where he perceives there is no more gain to be had by servitude and no more risk by outright refusal. When Damodar no longer has the orb, Klaxx subsequently abandons him to fend for himself, easily breaking any bonds of control Damodar might have over him - just as a powerful lich would do according to D&D lore. There were also dead drow hanging from the ceiling and whose blood was used for Damodar's "dinner". Juiblex was also mentioned, but the demon lord did not actually appear in the film.
There are also a number of references to classic D&D modules (such as The Ghost Tower of Inverness and the Expedition to the Barrier Peaks) in the film.
The commentary track which is spoken by "Lidda", "Krusk" and "Jozan" (iconic characters from the third edition D&D ruleset), who quip about the action on the screen.
From quick glimpses in the DVD's Interview with Gary Gygax, the heroes are shown to have the following characteristics in the D&D game:
There is also a reference to RuneQuest, another roleplaying game: the runes on the Libram and on the Turanian sealed portal are those that illustrate the RuneQuest books.
IGN scored it 3 out of 10, stating that only hardcore D&D fans should check it out, though mostly due to references to the game itself. Monsters and Critics awarded it 2 out of 5, stating, "If Lord of the Rings showed us how the fantasy genre can be done right, Dungeons and Dragons - Wrath of the Dragon God shows us how it can be done horribly wrong." One reviewer stated that Bruce Payne's 'performance is still the highlight of this one'. Another reviewer stated that Bruce Payne 'steals the show.'
A sequel, Dungeons & Dragons: The Book of Vile Darkness, was announced in 2011, and was released Direct-to-DVD in the United Kingdom on August 29, 2012.