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The kingdom of Kahna is in great danger. The evil Emperor Sauzer, obsessed by his world domination ideas, is preparing to invade the kingdom. The king sends his best troops of knights and wizards to face the enemy, but in vain - the kingdom is conquered by Sauzer, the king is murdered, and his lovely daughter is kidnapped. The brave leader of the Dragon Squad remembers the promise he gave the princess a long time ago: always be at her side. Supported by his friends and his faithful dragons, he must now free the princess and the kingdom from the enemy's hands. If only the strongest of the dragons, Bahamut, could be awakened...

Bahamut Lagoon is a tactical role-playing game. The player controls several parties of four characters each, and commands different dragons at once. The battles start on a top-down screen typical for strategy games, but often switch to a dynamic side view, such as often used in Japanese-style RPGs. The outcome of some battles can also be affected by other tactical decisions, such as, for example, setting a whole forest on fire to prevent enemies from coming through it.