Set on the subterranean Mine-World, a band of human worker are treated like slaves under the power of the evil overlord Zygon until one, Orin, unearths the hilt of a mythical sword that only he can master. Escaping the planet, he runs into the rogue smuggler Dagg and a pair of helpful droids and the princess, who all team up to return to the Mine-World with a plan to defeat Zygon and free Orin's enslaved people.
- In the year 2985 on a planet called Trinia, human slaves have lived underground for millennia mining crystals for a god named Zygon and his robot minions. One day, Orin, a young miner, finds a jeweled sword embedded in the rocks. Hopps, grandfather of Orin's girlfriend Elan, recognizes the sword and gives his life to keep the sword a secret. When Orin later takes the sword into his hands, it ascends into the air and buries itself in the cavern's floor. A projection of an old man appears from the blade, telling those present above the caverns is a magnificent universe that the people may find. The blade then disappears, leaving only the hilt.
Forced to leave Orin's young, blind brother Calli behind, Orin and Elan set out to discover this universe and find the blade to the sword. Chased by Zygon's robots, they emerge into an industrial complex where they meet Zygon, who reveals the face of a human man beneath his mask. Zygon strangles Elan to death, but Orin escapes this fate when Zygon is distracted by the sword hilt. When Zygon's robots fire on a crystal deposit by chance, Zygon presumed Orin dead in the resultant explosion and cave-in.
Orin digs a tunnel to the surface of Trinia, where he is later captured by Man-Droids, a group of decaying half-organic, half-robotic beings who intend to tear him apart and use his body parts to replace their own. Unexpectedly, his sword's hilt produced what is apparently an invisible blade, killing two of the Man-Droids and helping Orin escape. Orin subsequently runs into a human smuggler named Dagg Dibrimi, who takes Orin (whom he dubs "Water Snake" for his outrageous take about human slaves in the mines) along on journey to smuggle crystals. Eventually, Dagg seizes a load of crystals from a hovering freighter, but is driven away by Zygon and his robotic guards. During the fight, Dagg seizes a Fembot named Silica and uses it as a shield from laser blasts. Subsequently, reprogrammed by Dagg, Silica becomes attracted to him. At the same time, a mysterious Starfly appears and attaches itself to Orin.
Dagg flies his spaceship, the Starchaser, to a city called Toga-Toga on the planet Bordogon, where he abandons Orin and gives Silica to a slave auctioneer. Orin wanders through the city, trying to find a clue that will lead him to the location of the hilt's blade. After a meeting a fortune teller who tells him to visit a place called Novaluna, Orin sees Silica offered for sale, whereupon he offers high prices to buy her. When the auctioneer finds that Orin has no knowledge of local currency, he takes Orin's freedom in addition to Silica's; but moved by his own conscience, Dagg frees them. Dagg and Orin later visit the home of two desert-dwelling merchants, to whom Dagg sells the stolen crystals. Because Zygon placed a price on Orin's dead, the merchants offer to but Orin as well, but Dagg refuses. In response, the merchants place a time bomb in Dagg's payment. Orin is forewarned by the Starfly, whereupon Dagg and Arthur, the Starchaser's intelligent computer, throw the bomb into their enemies' camp. Thereafter, Dagg agrees to take Orin to Novaluna, but they are shot down by Zygon's robotic soldiers. Dagg is captured and the ship is rendered inactive; Orin is thrown clear out of the ship but is rescued by Aviana, the daughter of Bordogon's Governor.
Upon waking up and meeting Aviana, Orin tells her his story, whereupon Aviana's computer reveals that the hilt has historically been used by a group of legendary guardians called the Kha-Khan to vanquish threats to humanity. Among these threats was a tyrant named Nexus, after whose defeat the hilt vanished before Orin's discovery of it. Aviana takes Orin to Trinia, where he again faces Zygon. Orin attempts to kill Zygon for Elan's death and thereby exposes him as a robot. Zygon reveals that he is Nexus, seeking again to rule over humanity with his army of robots. Zygon takes Orin's hilt and begins to coordinate the attack, while Orin and Aviana are imprisoned in the cell block wherein Dagg is also captive. Just as Orin and Aviana confess their feelings toward each other, Aviana is taken aboard Zygon's flagship as a hostage. Orin is again approached by the Starfly, who brings him the hilt, which he uses to free himself and Dagg. They board Zygon's flagship and take control of it, using it (again aided by the Starfly) to destroy the enemy fleet. They are rejoined by Silica, who has restored the Starchaser.
Orin and his friends penetrate Zygon's base, but are attacked by his remaining troops. While Dagg and Silica stay behind to fight off their pursuers, Orin enters his original cavern home and begins to denounce Zygon, but is interrupted by Zygon himself. They fight, resulting in Orin dangling over a chasm while Zygon gloats over him. As Orin hangs over the chasm, three Starflies appear and merge into one; but instead of giving the hilt at his request, it states that he has no need of the hilt adding there was never a blade. Orin therefore realizes that the power to create a cutting force came from himself. At this, he pulls himself up, generates such a force, and uses it to destroy Zygon. Orin's people subsequently rise in revolt and win their freedom.
Above, Silica fires a laser bean from the Starchaser by mistake into the accumulated crystals, causing them to explode and triggering a chain reaction which threatens to collapse the mines. Orin uses the hilt to open a fissure by which his people ascend to Trinia's surface, where Orin uses his newfound power to heal Calli of his blindness and Dagg, Silica and Aviana join them. Moments later, several Starflies reveal themselves to be spirits of the previous Kha-Khan, including the elder man of the hilt's projection. They invite Orin to join them; but he refuses for the time being of living with his friends and his family. The other Kha-Khan respect Orin's choice and leave him as they fly into the starry beyond. The film's ending credits roll over a constellation of the blade-less sword's hilt.