A treasure chamber is unearthed beneath Camelot, the centre-piece being a glowing blue stone in the sarcophagus lid of Cornelius Sigan. Decades earlier, Sigan was executed for sorcery and died vowing revenge. Greedy Cedric, hearing only of the treasure, comes to Camelot. Learning that Arthur has the one key to the vault, he worms his way into the dim young prince's confidence and steals it, looting the chamber and prying away the stone (which is actually Sigan's wicked soul). Consequently possessed by Sigan's spirit, Cedric takes on his magic powers and animates the castle gargoyles, which terrorize the city. In return for a promise to one day set him free, Merlin acquires extra powers from the Great Dragon and does battle with Cedric, saving Camelot once again. Given what has happened, Uther is more convinced than before that magic is only evil.

A year after being whisked away from Camelot, Morgana is found, disheveled and bruised in the forest and claiming abduction by bandits. Superficially contrite and charming, she remains in league with Morgause, for whom she collects tears shed by Uther. These Morguase uses to curse him through a doll fashioned from mandrake root, which Morgana places under his bed. As it slowly starts to drive the king mad with hallucinates of ghosts, Morgause - after taking Merlin prisoner - induces rival king Cenred to invade the weakened kingdom, for which Merlin summons the Great Dragon for aid.

Morgana takes the dying Morgause to the Isle of the Blessed where she unwittingly tears the veil to the spirit world, unleashing the Dorocha, invisible ghosts that begin to attack the kingdom. At Camelot, where a weakened Uther has given over much of his rule to his scheming brother Agravaine, Merlin senses what is happening but finds his magic inadequate to stop it. As Camelot fills with refugees, Gaius reasons that, as one death opened the portal, only another will close it. Arthur offers himself as the sacrifice and travels to the Isle of the Blessed with Merlin and a group of young knights. Here, after Arthur has finally praised him for his bravery, Merlin appears to have a fatal encounter with one of the Dorocha.