A storm rages in a spooky-looking forest full of trees with menacing faces on their trunks. Kelek's dire wolves surround Silvermane, the unicorn.
Elsewhere, Uni somehow knows that Silvermane is in trouble and runs off to help, followed by the confused heroes.
A hound-mounted Kelek instructs his hounds to capture Silvermane but the unicorn is putting up a valiant fight and kicking them off him with his rear hooves. Uni tumbles into the scene much to Kelek's malignant delight but before he can grab her the heroes arrive so Kelek hides behind a rock, not wishing a confrontation at this stage.
The heroes battle the hounds, most notably with Presto conjuring a joint of meat to pacify the hounds. In the confusion a hound grabs Uni and delivers her to Kelek.
The hounds corner Silverman but he teleports to safety much to the heroes surprise. Uni witnesses the teleportation too and attempts the same as she is being abducted by Kelek. She only manages to teleport from in front of Kelek to behind him though. Kelek gloats that it's a pity Uni is too young to have learnt how to teleport properly and that she won't have time to either. He then recalls his hounds.
Realising Uni has gone the heroes follow the tracks to find Uni. Eric protests at first but a lightning flash illuminates the moaning visage of one of the spooky trees and promptly changes his mind.
Kelek travels across a bramble plain that magically part for him and explains to Uni that even if she knew how to teleport she could not as unicorns can only teleport once per day. Adding that the heroes are following just as he had hoped.
The heroes are spying on Kelek when Dungeon Master appears, laying casually on the brambles, and warns them about the evil wizard. Eric produces a pencil and notepad, determined to write down Dungeon Master's riddles but mixes the phrases up. Dungeon Master tells the heroes that Silvermane is the leader of the last unicorn herd and that unicorns can teleport because of their alicorns, before vanishing.
Hank concocts a plan where Eric has to forge through the brambles using his shield like a steamroller. Kelek is aware that they are following him and summons his castle which erupts out of a clearing in the ground before going inside.
Within the castle is a twenty-armed idol with all but four hands clutching a dismembered alicorn. Kelek explains to a shackled and terrified Uni that he wants her alicorn so that he can have complete mastery over teleportation. He is about to magically remove the alicorn when the heroes intervene but Kelek casts a spell that encases them in crystal. Conjuring Uni's alicorn from off of her head and into the grasp of one of the statue's empty hand he leaves the castle, grabbing an amulet before he goes and boasting about finding the Lost Valley of the Unicorns for the remaining three alicorns.
Goaded by the plight of Uni Bobby manages to shatter the crystal and escape. He tries to destroy the idol but is deflected by a spell. Hank also manages to shatter his crystal sheath and helps release the other heroes. Hearing a whinnying the discover a jail where the other hornless unicorns are.
The unicorns return back to their valley and the heroes follow, hoping that they can stop Kelek and remedy their alicorn removal. However, the heroes are unaware that Kelek does not know where the valley is and is spying on them so that he can discover its whereabouts himself, having guessed that the heroes would free the unicorns and that the unicorns would return home.
The unicorns lead the heroes through a multicoloured waterfall and into a tunnel behind it that opens up into the valley.
The freed unicorns are reunited with Silvermane and two other horned unicorns but Kelek appears and uses his amulet to levitate the remaining three horned unicorns away. Hank tries to stop him but before he can fire an arrow Kelek casts a spell that collapses boulders down onto the heroes; a crushing death is prevented by a force field generated by Eric's shield.
The heroes free themselves and meet Dungeon Master who reminds them that sometimes their worst enemy can be their strongest ally; alluding to Venger.
Returning to the bramble plain Presto remembers Dungeon Master's words and attempts to conjure Venger. Instead he teleports himself into Venger's castle and explains the situation to him.
Meanwhile, Kelek has only to remove Silverman's horn but the heroes distract him by making monstrous sounds while an invisible Sheila frees Silvermane's shackles. It doesn't fool Kelek though and he summons his hounds to deal with the heroes just as an enthusiastic Presto teleports back. Just as the snarling beasts are about to savage the heroes they are transformed into harmless puppies courtesy of a displeased Venger.
With false pleasantries Venger thanks Kelek for keeping the alicorns for him and asks for the idol's spell to be released so he can claim the horns. Kelek refuses and the two battle with mystic bolts, shattering the idol in the process.
Presto tries to conjure the alicorns back onto the hornless unicorns' heads but honking toy trumpets appear instead. He promptly cancels the spell. Eric produces his notebook and reminds the heroes what Dungeon Master said about "the fate of one is shared by all" and that only one is needed to be replaced. Presto conjures Uni's alicorn back onto her and this causes a magical domino effect that returns the alicorns to the hornless unicorns too.
Venger traps Kelek in a mystic bubble and with him powerless the castle sinks back into the ground. With the place falling apart around them the heroes manage to escape by riding the unicorns who teleport outside with Bobby riding on Uni and Hank riding on Silvermane.
Venger is enraged that he has lost the alicorns and seemingly perishes with the castle's subsidence but he rises from the earth in giant spectre form.
Back at the unicorn valley Bobby is saddened to leave Uni behind with her herd but elated when she decides to continue in following the heroes. The puppies remain behind to act as the valley's guardians as suggested by Dungeon Master.