Ellie, Strasheela and Tom the Bear get on the cloud with Almar and company and travel to Yellow Land, which proves to be vacant except for the palace. Just as they arrive at the palace, there is a strong earthquake, and a crack splits the palace into two. Underground monsters rise up from cracks in the ground and rush at the right half of the palace, where Villina and her loyal servants happen to be. Ellie and her friends have barely enough time to hole up in the left half of the building.

Almar tells them his story: he is an Ore-Digger, son of a royal huntsman in Underground Land whose father was arrested by their tyrannical king and sent off into slavery for Pakir. Almar escaped and made it to the surface, where Rohan, a Marran warrior employed by Villina, found him and took him to the palace. Villina adopted him, and Almar had begun martial training under Rohan, hoping some day to free his father. Ellie then tells him that the Storybook Folk have been trapped at one of Gingema's Black Rocks while crossing the desert. Almar immediately produces some magic raisins which can counteract the spell of the Rocks; the problem is getting the raisins to the victims.

Alarm leads the companions through a tunnel that takes them deep into the ground. Finding a boat, they set off down an underground river, which is supposed to bring them to the surface outside the World-Encompass Mountains.

The travel is long and perilous. After sailing down the river, finding along the way a magic torch at the tomb of an unknown wizard, as well as a graveyard of ships, the friends come out in an underground sea teeming with monsters. Villina's magic from afar again helps Ellie fend off the monsters. At the center of the sea lies the isle of Gorn, on which the evil magician Pakir lives with his monstrous warriors. His many slaves are building a huge stairway for Lord Pakir, by means of which he hopes to reach the surface of the earth.

The rough river flowing out of the Underground Sea takes Ellie and her friends to the Great Desert. There, they meet the scores of Storybook Folk who had been captured by Gingema's Black Rocks. Cranky alchemist Parcelius, who has come to Magic Land with them, has grown weary of waiting for help to arrive and has been trying to incite them against Ellie. But Almar frees the visitors from the Outer World by using the magic raisins. Soon they traverse the mountain pass and arrive in Blue Land. There, they meet with the Woodman, who has had a dream about the attack on Yellow Land. After a council of war, they dispatch his army to Yellow Land with the Storybook Folk, while Elli, Strasheela, and Parcelius travel there on a flying basilisk. When they reach the Yellow Palace, the basilisk paralyzes Pakir's monsters with his magic eye and brings his riders down on a balcony.

So after many years Ellie and Villina meet again. It turns out that Villina was not a sorceress by birth. She is an Inuit, and was born in a village in far-off Greenland. After being orphaned and driven from the village by a power-hungry wizard, she entered a cave and found Torn's journal, where she learned of his victory over Pakir and how he banished him to an underground abyss. Torn had dwelt in that cave for a hundred years after the destruction of his native Atlantis, after which he had gone to America and created Magic Land. Before his death, he had foreseen the arrival in this cave of a little girl naturally talented in magic, and decided to make her Protectress of Magic Land. He had left her his magic book, and she had learned magic from it and traveled to Magic Land... She had settled in Yellow Land, which Torn had purposely kept vacant so that the Storybook Folk could eventually settle there.

After finishing her story, Villina tells Ellie that, being so old now, she is about to depart from Magic Land and is leaving her, Ellie, behind as Protectress. She urges her to make peace with Corina and that the two become allies, and states that Corina was not responsible for the deaths of her parents.

The monsters paralyzed by the basilisk soon recover and renew their attack. But after three days, Corina and the Iron Woodman, mounted on Varag the Black Dragon, fly to their aid. Corina gets rid of the monsters. Villina instructs the girls to live peaceably and to combat Pakir together. In return, Corina receives Violet Land, while the Woodman, Strasheela, and Almar decide to set out to explore Magic Land. Villina gives them a map that she has made while flying around the country on a magic cloud. The friends will have to explore the mysterious places on it by foot. She also mentions Torn's Sword, and expresses her wish that Almar be the one to find it, for it will be indispensable in the war with Pakir. She transfers her magic power to Ellie by stroking her on the forehead. Then, saying farewell, she departs on a magic cloud, heading first to Rose Land, and from there back to her native Greenland.

Synopsis courtesy of Peter Blystone