The game's story unfolds primarily through a series of seven playable campaigns, all set upon the continent of Antagarich. During the campaigns, the story is told from alternating points of view, giving players the opportunity to play as each of the town alignments.

Following the disappearance of King Roland Ironfist of Enroth prior to Might and Magic VI: The Mandate of Heaven, his wife, Queen Catherine, is left to rule the realm. In the meantime, her father, King Gryphonheart of Erathia, is assassinated. Without their beloved King, the kingdom of Erathia falls to the dark forces of Nighon and Eeofol. Queen Catherine returns home to Antagarich seeking to rally the people of her homeland and lead them against the evil that has ravaged their nation.

Erathia's capital of Steadwick is sacked by the dungeon lords of Nighon and the Kreegans of Eeofol. Meanwhile, the nations of Tatalia and Krewlod skirmish at the western border, seizing the chance to expand their territory. Catherine's first task is to establish a foothold in the conquered kingdom by enlisting the aid of allies. The wizards of Bracada and the elves of AvLee answer her call, and together they push towards Steadwick and eventually retake it, quickly quelling the border war in the west. Soon after, Lucifer Kreegan, a commander in the Eeofol armies, sends an envoy to Erathia claiming that Roland Ironfist is captive within their territories. AvLee invades Eeofol, but fails to rescue Roland, who is transported to their northern holdings. Afterwards, Catherine invades Nighon, pushing the dungeon armies back to their island home.

In the meantime, the necromancers of Deyja, having been responsible for the assassination of King Gryphonheart, plot to revive his corpse as a lich. They plan to use his wisdom in leading their own armies of the undead. However, King Gryphonheart's will proves too much for the necromancers even in his corrupted state, and he becomes a rogue lich. Having little other recourse, Queen Catherine is forced to ally herself with the necromancers and together they set out to destroy the lich of King Gryphonheart before he becomes too powerful.

A final bonus campaign, accessible only after the main campaigns are complete, tells the story of separatists living in the Contested Lands, a war-torn border between Erathia and AvLee. Tired of the skirmishes that bring unrest to their homelands, they join together to fight for independence from the two large kingdoms. It is later implied that this rising was orchestrated by Archibald Ironfist, the antagonist of Heroes of Might and Magic II.