You're sent to Daggerfall at the request of the Emperor, who is concerned about events there. You are given two quests: to liberate the tormented soul of King Lysandus haunting Daggerfall, and to find a letter from the Emperor to his queen. The Emperor says the contents of the letter are unimportant, but, in fact, the missing letter was to have been delivered to Lady Brisienna Magnessen, the noble sister of a Great Knight of the Blades in disguise at the court of Daggerfall, posing as one of the witches of Popudax.

The Blades are a group of knights who work clandestinely for the good of the empire. Their goal is to repair the great iron golem, Numidium, which forcibly united the Empire hundreds of years before under the rule of Tiber Septim. The Blades have been assembling the pieces of Numidium ever since it was shattered by the Underking. They have in their hands the Totem -- an artifact capable of controlling the Numidium.

Only one piece remains to energize the golem -- the Mantella, a great engine that is the heart of Numidium. King Lysandus' mother, Nulfaga, had discovered the location of the Mantella in her astral travels, and informed the Emperor that she would give the location if he would guarantee that by recreating Numidium he would not destroy any of her son's power.

The Emperor doesn't like being presented with conditions, so he sends a letter by priest to Brisienna (though officially addressed to Mynisera -- a special seal on the envelope was to tip Brisienna that the letter was actually for her). The letter directs that whatever pressure is necessary, Nulfaga must be persuaded to yield up the location of the Mantella.

The priest is delayed by the war, and delivers the letter not to the old queen Mynisra, but the new queen Aubk-i. The new queen's lady-in-waiting is, of course, not Brisienna.

Instead the letter passes directly to the new queen, Aubk-i. She reads the letter, realizes it was meant for her predecessor, Mynisera (which, of course, is wrong -- it was really meant for Brisienna), and becomes very nervous about her mother-in-law and the Emperor. She files the letter away.

Brisienna has meanwhile left the Queen-Mother's service and is now working for Popudax and has no clue about the events. Aubk-i cannot trust anyone, especailly if she learns that Mynisera was (maybe is) sleeping with Lord Bridwell. She certainly isn't going to trust you.

The lady-in-waiting, noticiing that Aubk-i was rattled by a recent letter, reads it, and sells the information (which she does not really understand, except that it is important) to the highest bidder.

This turns out to be the orc Gortworg, who wants all the dirt he can get on all the royal families of High Rock. He has no idea what the Mantella is and consults the King of Worms, leader of the Necromancers.

Nulfaga is the only one who knows where the Mantella is. And Gortworg, the King of Worms, and the Emperor all know that she knows. The Underking is in a tomb in High Rock, still recovering from using up all his energy to blow up Numidium hundreds of years before. He's getting stronger, but not quite mobile yet.

In order to get the Mantella to someone, you must lay Lysandus to rest. To do that, you have to kill the man responsible for his death (Lord Woodborne, in his heavily defended fortress) and perform a ceremony at the spot where he was killed, over at least one of his bones.

The Totem disappears from possession of the Blades and passes from faction to faction during the course of the game. Once the Mantella is activated, its power races across the bay, bringing the Underking totally to life.

Daggerfall can end in any of six ways:

• If you activate Numidium, and you hold the Totem, Numidium will crush you dead, then go on a rampage and be destroyed by the forces of the Empire.
  
  
• If the Underking is given the Mantella, he grabs the gem and sucks all the energy out, thus giving himself final rest at last, and in the process creating an anti-magic zone of several miles radius around that area.
  
  
• If Gortworg wins, Numidium defeats the forces of the Empire and the kings of the Bay just before the Underking arrives on the scene -- destroying the golem and himself. Nevertheless, the result is the rise of Orsinium and the further crumbling of the Empire.
  
  
• If the Blades win, Numidium is created. It defeats the forces of the orcs and the kings of the Bay, uniting the provinces of Tamriel under the Emperor.
  
  
• If one of the Kings of the Bay wins, all the other forces are defeated by Numidium, followed by the Underking's appearance to destroy the golem and himself (as in the Gortworg climax).
  
  
• If the king of Worms wins, he uses the power of the Mantella to make himself a god.