The game starts with Spyro, having decided to take a break from his many adventures, at Dragon Shores. Just finishing his vacation, Spyro bids his friends on their way back to the dragon realms goodbye, having to spend the rest of his time there studying under the elders. Not long after though, a dark storm rolls in, knocking the inhabitants of the island out. Waking up in the shadow realms, Spyro begins his search for his friends while encountering enemies even he himself is powerless against. After managing to make his way out, he is granted a shadow stone by Elder Tomas to protect him against the draining effects of the shadow realm and allow him to transfer between the two worlds, and with some convincing, Spyro begins to learn the art of Dragon Kata from the elder Ragnar, as well as some basic magic training to combat the one behind all this.
Now, once again trusted into the role of saving the dragon realms, Spyro must do battle against traitorous elder Red, the dragon bent on dragging the realms into the shadow realms. Now face with what is quite possibly his most difficult adventure yet, will Spyro be able to overcome it like always, or has the purple hero finally met his match...?
This game contains examples of:
- Dual-World Gameplay: The game pits Spyro against enemies from the Shadow Realm. These creatures are impervious to standard attacks, which makes it easy for them to capture just about everyone; even Spyro himself is initially powerless against them. After undergoing a crash course in new combat techniques, Spyro hops back and forth constantly between the material and shadow planes; some bosses require you to switch worlds multiple times to bring them down.
- Furry Reminder: Dragon beds are circular (so the inhabitants can curl up on them), quiltless, and low to the ground. Presumably, when you can breathe fire, you don't need to worry about feeling cold at night.
- Good Morning, Crono: The game starts with Hunter waking Spyro up from a nap.
- Heroic Mime: Spyro is completely silent in this game, the only time this has ever happened in the franchise's history.
- Interspecies Romance: An armadillo cowboy falls in love with a dragon.
- Man Behind the Man: The Sorceror is revealed to have been controlling Red throughout his tenure as an antagonist, even through A Hero's Tail. Red does a HeelFace Turn when he reveals this to you, and goes on to resume his Dragon Elder post in the epilogue.
- Outside-Context Problem: The Shadow Minions. Even Spyro can't damage these things until he starts learning Dragon Kata.
- Sequel Hook: The game ends with Spyro preparing for another attack from the Sorcerer sometime in the future, implying he's not done yet. The game was the followed by two Continuity Reboots, followed in turn by a remake of the original three games, leaving the hook dangling indefintely. The closest the game got to a sequel of any sort was a Spiritual Successor in the form the DS version of The Legend of Spyro: A New Beginning, and even then, that was set in a whole other continuity.