An ancient tomb is discovered beneath Camelot which is filled with treasure. Merlin is sent to resolve the noise issue which is resulting from the excavation (and keeping Arthur from sleeping) and is faced with panic as workers flee the site when one of their own is killed by a booby trap.
While Gaius studies the tomb, in particular a large heart shaped jewel set in a sarcophagus at the tomb's centre, a thief named Cedric learns of the treasure and works his way into the castle in order to gain access to the tomb, granting him entry to the treasure. By muscling in on Merlin's position as Arthur's manservant, Cedric successfully turns Arthur against Merlin, leaving Merlin once more annoyed and depressed that the prince cannot see him for who he really is.
Gaius realises that the tomb belongs to an evil sorcerer named Cornelius Sigan, who had sworn to destroy Camelot upon his death. Sigan, fearful that his power and wealth would die with him, found a way to make himself immortal: he stored his soul inside the large jewel, which would then possess the person who removed the jewel from its setting. Gaius' warning proves unfruitful when presented to Uther, as he is too taken with the treasure and too proud to believe in such a myth. The next night, Morgana is awakened by nightmares featuring a raven, which solidifies Gaius' theory of the return of Sigan, as the raven was an emblem of his power.
Once Cedric has stolen Arthur's keys to the tomb, he comes across the heart-shaped jewel containing Sigan's soul. By removing it from its setting, Sigan's soul is released and possesses Cedric's body. Gaius and Merlin realise the consequences of the jewel being removed the next day and Merlin deducts that the only other person with access to the key would be Cedric, and runs to alert Arthur. Arthur refuses to believe Merlin and after a scuffle with Cedric, Merlin is taken to the cells.
That night, Cedric invokes a spell which animates the gargoyles positioned around the castle in his attempt to destroy Camelot. As Merlin remains locked in his cell, the creatures cause havoc in the city, killing many citizens. Arthur and his soldiers face off against them, many of them perishing. Gaius, Gwen and Morgana tend to the wounded inside the castle while Merlin uses magic to break out of his cell. As Arthur faces one of the creatures alone in the square, Gwen saves his life twice before taking him inside to tend to his injuries. Arthur nervously compliments Gwen on her bravery before thanking her as she leaves to prepare a dressing for his wound. Merlin is told by Gaius that the only way he can stop Cedric is to consult the Great Dragon, to which Merlin is initially opposed. He relents however, and rushes to ask the Dragon for advice. The Great Dragon makes Merlin promise to release him one day in return for a powerful spell which would defeat Cedric, something Merlin reluctantly agrees to.
Meanwhile, Arthur refuses Uther's proposal to shut off the citadel to protect those with a chance of surviving and rallies his men to leave the castle and face the creatures once more, as it is his duty to Camelot and to himself. Arthur and his men are pushed back inside the square by the creatures and he orders the soldiers to retreat, as he faces the creature on his own. As Arthur's men retreat inside the castle, Arthur is knocked unconscious by the creature. Before it can kill him, Merlin arrives and destroys the gargoyle with his magic.
Merlin arrives to find Arthur's body and encounters Cedric, who tries to entice Merlin to join him in ruling the land with their magic. Merlin is perplexed by the proposal as he is still affected by the lack of respect he receives from Arthur, but realises it is better to be treated as a slave than to rule with evil. The soul of Sigan leaves Cedric's body to inhabit Merlin's in order to conjoin both magics into one superpower. Merlin recites the spell which forces Sigan's soul back into the jewel, bringing safety upon Camelot once more.
The tomb of Sigan is covered up once more, with the jewel inside, never to be removed again. Uther comes away from the experience more passionate than ever to eradicate all form of magic from the kingdom while Arthur, in his own way, apologises to Merlin; by making him clean his armour.