In the movie, Sinbad and his crew are sailing to Baghdad when they come across a mysterious island. On the island, they encounter an evil magician named Sokurah who has shrunken a princess named Parisa. Sokurah tells Sinbad that he needs a magic egg from the island of Colossa to return Parisa to her normal size.
Sinbad agrees to help Sokurah and sets sail for Colossa. However, upon arriving on the island, they are attacked by a giant cyclops. With the help of Parisa, Sinbad is able to defeat the cyclops and reclaim the magic egg.
As they are heading back to the island where Sokurah and the rest of the crew are waiting, they are attacked by a giant bird-like creature called a Roc. They are able to defeat the Roc but end up shipwrecked on a small island.
On the island, Sinbad is faced with various challenges, including a sword fight with a skeleton and an encounter with a dragon. Eventually, Sinbad and his crew are able to get off the island and return to Sokurah with the magic egg.
Sokurah uses the egg to restore Parisa to her normal size, but he also uses it to create a giant dragon that he can control. Sokurah plans to use the dragon to take over Baghdad, but Sinbad and his crew are able to defeat him and destroy the dragon. In the end, Sinbad and Parisa are reunited and set sail for home.