In AD 740, one of Merlin's three apprentices, named Maxim Horvath,betrays him by joining forces with the evil sorceress Morgana le Fay. Morgana mortally wounds Merlin before another of Merlin's apprentices, Veronica Gorloisen, absorbs Morgana, body and soul, into her own body. As Morgana tries to kill/possess Veronica from within, the third and final apprentice, Balthazar Blake, stops her by imprisoning Morgana and Veronica in the "Grimhold", a magic prison in the shape of a nesting doll. Before dying, Merlin gives Balthazar a dragon ring that will identify the Prime Merlinean, Merlin's successor, who will be the only one able of defeating Morgana. Throughout history, Balthazar imprisons Morganians, sorcerers who try to release Morgana, including Horvath, into successive layers on the Grimhold, while he searches for the successor.
In 2000, 10-year-old Dave Stutler, encounters Balthazar in a Manhattan antique store. Determining that the boy may be the successor, Balthazar gives young Dave Merlin's Dragon Ring, which comes alive and wraps itself around Dave's finger. Dave accidentally opens the Grimhold, releasing Horvath. While battling for possession of the Grimhold, Balthazar and Horvath are imprisoned in an ancient Chinese urn with a ten-year lock curse. Dave is humiliated as he is discovered by his teacher and classmates with his pants wet due to a vase that broke in his lap, and as everyone enters the store, there is no trace of the battle, so it is believed Dave made it up.
Ten years later, Dave, now 20-years-old, is a physics student at New York University and has made the reacquaintance of a childhood crush, Becky. Meanwhile, the 10-year imprisonment curse of mystical urn end and the urn opens, releasing Horvath and Balthazar. Horvath goes after Dave in search of the Grimhold, and Dave is eventually rescued by Balthazar, riding an animated steel eagle created out of a Chrysler Building gargoyle.
Dave initially refuses