This movie follows the adventures of Lina and Naga as they find a kingdom under siege by the king's daughter, who is using dragons as her army by speaking to them, for the great cause of..... RAISING HER ALLOWANCE?! But, at the same time, a sinister plot to bring the dragons to power over humans is under way...
Visiting a city, Lina Inverse and Naga the Serpent witness a sudden rampage of the dragon army of the young Marlene and effortlessly repel the attack. Marlene's estranged father Lord Culvert then hires Lina to help stop his daughter's raids. But Naga, Lina's friend-enemy "greatest rival", decides to instead join Marlene's side for a bigger bid.
Lina and Culvert lead the human army for an assault on Marlene's castle. Meanwhile, Naga and Marlene's forces set out as well in the other way, leaving the castle vacant for Lina's magic to level. Naga and Marlene rush back and meet Lina and Culver's army. Marlene has a natural relationship with dragons and is able to command them easily, but her dragons flee after only hearing the very name "Lina Inverse" and Lina quickly defeats Marlene's warlord Thornfort. Lina and Naga meet for a personal duel, from which Lina emerges victorious. Marlene also challenges Lina with her Chaos Sword, but Lina manages to break it.
But then Marlene's other warlord, Gaizno, reveals his real form, transforming himself into a gigantic evil dragon that starts attacking both sides and the city itself. During the great battle, Lina and Naga work together, as Naga succeeds in distracting Gaizno with creative magical attacks long enough for Lina to overcome Gaizno's magic defenses and destroy him with her powerful Dragon Slave spell.
Marlene and her father reconcile and end their war, which they waged only over the amount of her weekly allowance money. The land's dragons and humans are also going to live in peace and rebuild the city together. Lina and Naga leave for their new adventures, as always bickering and fighting each other on their way.