The Brigadier visits his great-uncle Mario on the island of San Stefano Minore, near Sicily, to help him deal with a one-armed American mobster named Max Vilmio who seems determined to purchase the island from Mario -- whether or not he wishes to sell. As the Brigadier discusses the situation with Mario, he is startled by a hideous monster which suddenly appears at the window. Mario dismisses this apparition as one of the many fiends from Hell which haunt the castle, and the Brigadier, not quite so sanguine about it as Mario, decides to call in the Doctor.

As it happens, Sarah is on holiday in Sicily with Jeremy Fitzoliver, whose mother bowed out of the trip and left him with an extra ticket. Sarah’s editor Clorinda has been turning down her submissions about her adventures with the Doctor, and in a fit of pique Sarah has decided to give up journalism and try to write the Great British Novel. Stuck with a knotty plot problem and unwilling to use coincidence to get her characters out of their predicament, she decides to go out sightseeing with Jeremy. They are surprised to see the Brigadier boarding the ferry to San Stefano Minore, and are even more surprised when he looks at them as though he’s seen a pair of ghosts and boards without acknowledging their presence. Curious, Sarah decides to follow him to find out what he’s up to, and drags the reluctant Jeremy along with her.

Meanwhile, Don Fabrizzio and his consigliere Clemenza meet with Max Vilmio to offer him the protection of the local Family. They believe that Vilmio intends to open a “leisure complex” on San Stefano Minore -- or as others would put it, a brothel -- and are unwilling to let him do so without their permission and participation. Vilmio rejects all of their terms, and as his associate Brother Nicodemus watches, Vilmio savagely crushes the Don’s face with his metal arm. He allows the horrified Clemenza to live, explaining to his gun-moll Maggie that he wants Clemenza to take a message back with him -- Vilmio is capable of protecting himself, and he’s got more important things to do than get involved in a turf war with the local Family.

Sarah and Jeremy follow the Brigadier all the way to the castello, which boasts a fascinating combination of architectural styles. As Sarah admires the partially collapsed garden wall and the Renaissance-era bell-tower, however, Jeremy is getting more and more bored, and eventually his whining gets on her nerves and she agrees to return to the main island with him. By the time they get back to the dock, however, the last ferry has gone, and Sarah realises that they’ll have to return to the castello to seek shelter. She is unwilling to admit to the Brigadier that she followed him, but as she tries to think up a convincing story to explain her presence, she and Jeremy hear a woman wailing in despair on the cliffside. When they investigate, they see a woman in white sobbing for her lost Giuseppe, and before Sarah can react the woman leaps over the ruins of the garden wall and falls over the cliff to her death. Sarah rushes to the cliff to look for the woman’s body, but she and Jeremy are then attacked by a hideous fiend…

The Doctor has arrived in the TARDIS in response to the Brigadier’s call, and is discussing the castello’s haunted history with Mario. The woman in white has haunted the castello for decades, but the monsters only began to appear recently, driving away most of Mario’s servants. They then hear the sound of screaming from the cliff, and arrive just as the monster fades away. Sarah has fainted from shock, but the Doctor pulls her away from the edge of the cliff before the wind blows her over. As she recovers, the Brigadier apologises for ignoring her and Jeremy earlier; after what he’d seen at the castello he assumed they were figments of his imagination. The Doctor seems unsurprised by their arrival, chalking it up to synchronicity -- apparent coincidences, which are connected on levels the human mind cannot perceive.

The monster vanishes when the Doctor turns off his machine; this was merely a re-enactment of the events of last night. He apologises for frightening his friends, but admits that his worst fears have been confirmed. At some point in the past, the N-Space barrier in this area suffered a great shock, and was seriously damaged -- and soon it will crack wide open. The ghosts of the dead are trapped in N-Space only by ignorance of their true situation, and those who can let go of the negative emotions binding them to N-Space pass on to the next plane of existence. But the negative emotions remain behind, with no selves of their own, and take on the form of demons and fiends. When the barrier breaks, all of the evil in N-Space will flood out into the real world, and the Doctor doesn’t know how to stop it.

The Doctor sets about building a machine which will enable him to separate his N-form from his body and seek the origin of the fracture. As he does so, Vilmio arrives at the castello to threaten Mario once again, but the Brigadier firmly sees him off; however, Vilmio vows to return. Sarah, meanwhile, searches the library for mention of ghastly events in the castello’s history, but it’s Jeremy who finds a clue hidden inside a copy of Ann Radcliffe’s “The Mystery of the Castello” -- a fragment of an alchemical text, which indicates that the practitioner can break through the barrier “under the wing of the dragon”. Sarah shows the parchment to the Doctor, who has finished his machine but needs someone to accompany him. Since the Brigadier must remain in the castello to protect Mario from Vilmio, Sarah volunteers.

The Doctor and Sarah strap themselves in, and when the Doctor switches on the machine, Sarah suddenly finds herself floating above her own body. She and the Doctor pass through a tunnel of light into N-Space, a ghastly wasteland where Sarah catches intimations of other souls in the corners of her eyes. The woman in white is trapped here, crying out for Giuseppe, and other lost souls are being consumed by hideous fiends which embody their own dark emotions. The Doctor guides her through N-Space to an earlier time, a point at which the fracture received a shock which further damaged it. There, before realising that their astral forms will appear as ghosts to the castello’s inhabitants, they frighten an unfortunate serving girl by appearing to float through a wall before her eyes. Her claim to have seen ghosts isn’t believed by the rational owner of the castello, but the Doctor realises from their conversation that the castello has been visited by poltergeists before. His suspicions are confirmed when he and Sarah see a 15-year-old girl in the library; poltergeist activity is usually linked to disturbed adolescents.

The Doctor and Sarah then travel three centuries further back to a point just before the fracture first opened. There, they watch as an alchemist in the garden shed forces his terrified apprentice, a young monk, to drink the potion of life. It appears that he has mixed the potion incorrectly, however, as the monk drops dead and his spirit rises from his convulsing body. Irritated, the alchemist casts a spell which forces the spirit -- which doesn’t realise it’s dead -- to obey his every command. He nearly spots Sarah when she drifts closer for a better look, but the Doctor drags her away just in time. They then travel to the Great Hall, where the lady of the manor weeps for her son’s death at Grenada, and over the arrival of a man with the name of the German Emperor, who bears letters identifying himself as the barone’s cousin; the barone’s wife is certain that he is an impostor and an evil sorcerer. The Doctor has heard enough to place the date shortly after the taking of Grenada in 1492, and he and Sarah thus return to their bodies in the twentieth century, intending to use the TARDIS to visit these times in person.

As the Doctor prepares for his expedition, Sarah and Jeremy visit the village for ice creams, and Sarah offers to ask the Doctor whether Jeremy can accompany them. Jeremy turns down the offer, and Sarah, disgusted by his cowardice, returns to the castello, leaving Jeremy in the village. There, he sees Vilmio speaking with Nicodemus -- and telling him to kill the Doctor, who must be out of Vilmio’s way by the 21st. Jeremy rushes back to the castello to warn Sarah, who doesn’t take his warning seriously; how can Nicodemus harm the Doctor while the Doctor is in an entirely different century? She joins the Doctor in the TARDIS, and as they depart, Jeremy changes his mind about accompanying them -- too late. Meanwhile, Maggie offers to help Vilmio, and he agrees to let her -- but doesn’t explain his interest in the castello to her.

Fortunately, Sarah has merely been struck a glancing blow, but has suffered a mild concussion after hitting her head on the floor. Louisa tends to her while she recovers, and the Doctor, after ensuring that she will be all right, attends dinner with Paolo, who is now more willing to lend credence to his servants’ tales of ghosts. He tells the Doctor about the castle’s past, while Louisa tries to keep her friend’s spirits up with a rather more romantic telling of the same story -- a tale of a false claimant to the barone’s inheritance, a mad monk who tried to raise the forces of Hell, but failed and was walled up alive by a good magician. Sarah’s convalescence is tainted, however, by her growing realisation of who the woman in white must be…

Jeremy, feeling at a loose end, convinces the Brigadier to lend him a spy-glass so he can keep an eye on Vilmio’s yacht. He thus sees Vilmio sending Maggie to the castello, to find out if the castello’s inhabitants have seen any ghosts recently, and if they are aware of the significance of the 21st of May. To the Brigadier’s discomfort, Mario is happy to show his pretty young visitor around the castello, and she drops a few hints about 21 May, hoping to get a reaction. Jeremy decides to follow her back to the yacht to find out what’s so important about that date, but when he hides in a broom cupboard on the yacht to avoid discovery, he accidentally locks himself in and is carried out to sea when the yacht departs. Realising what he’s done, he panics and calls for help, and is thus captured. Maggie recognises him from the castello, and Vilmio begins to torture him for information about the Doctor. Eventually, having beaten Jeremy half to death, Vilmio decides he’s useless and decides to dump him overboard. Maggie, however, is horrified that Vilmio has tortured an innocent kid, and that night, when everybody else is asleep, she rescues Jeremy and helps him to escape in a dinghy.

Morning in 1818. Louisa, delighted to have a friend at last, gives Sarah a copy of “The Mystery of the Castello” by Ann Radcliffe. The book tells the same tale that Louisa related the previous night, with some embellishments -- apparently a chest of gold coins was walled up with the monk as well. Louisa shows Sarah a scrap of parchment which she believes to be a fragment of an alchemical text, and Sarah recognises it as the same parchment which she and Jeremy found in the 20th century -- and which the alchemist in the 16th century was using to mix the elixir of life. Sarah lies to Louisa, claiming that it’s a fragment from a cookbook, and shows the parchment to the Doctor while the disappointed Louisa goes for what she claims is a walk in the garden. In fact, the Doctor and Sarah see that she’s sneaking off to meet the gardener’s boy, and when Louisa returns, Sarah teases her about her new love. Louisa takes Sarah to the garden shed, telling her that this is where the alchemist and the chest of coins were walled up; at the stroke of midnight she and her love intend to break through the wall and discover the treasure, for which Paolo will surely consent to their betrothal. But Louisa’s love is named Giuseppe, and Sarah knows what is going to happen to her new friend…

Sarah rushes back to the Great Hall to tell the Doctor what she has learned, and is just in time to see Nicodemus push the Doctor from the gallery. The Doctor tucks and rolls safely to the base of the stairwell, but when Sarah identifies the monk as Max Vilmio’s hit man, the Doctor realises that Nicodemus is the dead young monk they saw in the 16th century, and that Vilmio is the alchemist -- the one who bears the name of the German Emperor, Maximillian, and who was attempting to concoct a potion of eternal life. Obviously he succeeded, and this means that the Brigadier is in even greater danger than he’d thought. The Doctor sets off to warn the Brigadier before travelling back to the 16th century to find out what Vilmio is really up to. Sarah begs him to stay, telling him that Louisa’s going to die -- but the Doctor points out that eventually, everybody is.

Maggie and Jeremy’s dinghy runs out of petrol before they reach the safety of the island, and as they wait for Vilmio to recapture them, Maggie tells Jeremy that when Max beat him she was reminded of her father beating his own kids. She eventually killed him by pushing him out of the window, and isn’t sure herself whether it was an accident. Jeremy then finds a box of flares beneath Maggie’s seat, and they make it safely back to the castello. There, the Brigadier fills them in and holds a council of war; somehow they must prevent Vilmio from breaching the outer walls, but this will be difficult since Nicodemus can float through them and the outer gate has been stuck open for centuries. While trying to close the gate, the defenders are attacked by another fiend which fires bolts of energy at them, but the Brigadier drives it away with his stun-gun, and a stray energy bolt jolts the gate free, enabling them to close it.

Back in the 16th century, Vilmio returns to his quarters to ensure that his copy of the alchemical manuscript is indeed intact, and the Doctor follows him and learns where the text is hidden. As soon as Vilmio leaves, the Doctor nips into the shed to steal the rest of the manuscript and learn Vilmio’s plans. Sarah, standing watch, sees Guido singing sadly to himself in the garden, and Guido confesses that he deserted his company before the siege of Grenada because he didn’t wish to fight for a country that held his land in chains. His father will think him a traitor and a coward, but Sarah advises him to tell the truth anyway; being thrown out of the castello is better than living a lie.

The Doctor, having learned all he needs to know, takes Sarah back to their quarters and tells her that Vilmio has acquired an alchemical text passed down through several civilisations of Mankind. He intends to merge his earthly body with his immortal N-form, acquiring physical immortality; and when he opens the barrier at the stroke of midnight, he will be able to enter N-Space in his immortal body, gain power over the N-forms within and emerge to become master of the world. As the Doctor ponders how to stop him, he and Sarah are summoned to the Great Hall, where the furious barone informs them that Vilmio has shown him the parchment which the Doctor passed him earlier, proving that the Doctor and his page are not the devout Christians they had claimed. Accusing them of necromancy and Satanism, the barone has them thrown into the dungeon to face the Inquisition at Palermo…

The Brigadier and his allies close and bar the castello gate, and prepare to defend the walls. Mario intends to use his ancient blunderbuss, which might very well kill him with the recoil even if he manages to hit the target. As the Brigadier ponders how to defend the castello against a helicopter, he realises that they need someone to stay in the courtyard and guard the skies against Nicodemus. Jeremy volunteers, telling the Brigadier that he’s always been a dab shot at the fairground shooting gallery; unfortunately, he’s the only one even remotely qualified, and the Brigadier reluctantly grants him the responsibility.

As the castello’s bell-tower strikes eleven, Guido writes a note to his mother apologising for his actions; he now intends to go to his father, confess everything, and leave his home forever. But before he does so he releases the Doctor and Sarah from the dungeon in gratitude for “Jack”’s advice; if they meet again, they will know him by his adopted name Guido il Menestrello. The Doctor has been pondering the reference to the “wing of the dragon” in the alchemical text but is no closer to deducing its meaning. He sets off to stop Vilmio, and although he tells Sarah to stay behind, she decides instead to break into the bell-tower and try to prevent the clock from striking midnight. As she passes the Great Hall she hears Guido and his father arguing bitterly, but has no time to find out how things will turn out for Guido; as it is, she reaches the bell-tower with less than a minute to spare, and with no idea how to stop the mechanism from striking…

The Doctor and Sarah depart medieval San Stefano in the TARDIS, congratulating themselves on successfully changing the course of history after Sarah held onto the hammer to stop it from striking the clock bell. But as the Doctor fetches breakfast for Sarah, she casually mentions that this is just how events turned out in Ann Radcliffe’s novel “The Mystery of the Castello” -- and she and the Doctor realise that, rather than changing the course of history, they’ve participated in it. This is always how events turned out, and Louisa and Guiseppe’s ill-fated attempt to search for buried treasure in the garden wall must be the event which releases the immortal Vilmio. They must return to 1818, and Sarah must convince her friend to abandon her plans, perhaps saving her life in the process.

In the 20th century, Vilmio sends Nicodemus to open the castello gate from the inside so he and his thugs can storm the castello. Nicodemus floats over the wall, but Jeremy blasts him away with the stun-gun, and Vilmio must send in his thugs with machine-guns and step-ladders. The Brigadier uses the stun-gun on the attacking thugs, while Maggie and the others push over the siege ladders as the thugs try to climb over the walls. But this attack is merely a distraction, and while they’re occupied, Nicodemus floats over the cliff, through the collapsed wall and into the gatehouse. Just as all seems lost, a fiend like a burning thirty-foot-high horse with gnashing teeth materialises and consumes the terrified Nicodemus -- and as Maggie steps forward, gazing at the fiend in awe, it flows into her body, possessing her. Vilmio tries to flee to a helicopter and pilot it into the castello’s courtyard, but Maggie uses the powers of the fiend to blast it out of the sky. Vilmio survives the crash, and when Maggie tries to blast him as well, he absorbs both the energy of the blast, and then the fiend itself, into his own body. The Brigadier’s stun-gun has no effect on Vilmio, and he is forced to watch helplessly as Vilmio uses his new powers to vaporise Maggie with a gesture.

The Doctor shares wine and discusses spirits and astronomy with Paolo Verconti, while Louisa models clothing for Sarah and enthuses over the handsome Giuseppe. She leaves for a “walk” in the garden, and Sarah decides to follow and eavesdrop on her conversation with Giuseppe to learn when they intend to act. But when she tries to leave she finds that Louisa has locked her in, which can only mean that the grand scheme must be set for tonight. Meanwhile, Paolo leads the Doctor to his observatory above the bell-tower to show him a wonder which has not been seen by Man for 157 years. Despite the oncoming storm, the clouds part just long enough for Paolo and the Doctor to catch a glimpse of Clancy’s Comet. The Doctor finally realises what he’s been missing, and rushes out of the bell-tower, leaving the confused Paolo far behind.

Sarah tries to knot her bedsheets together and climb out of the window, but gets stuck halfway; fortunately, the Doctor finds her and is able to talk her down. Together, they rush to the north wall to stop Louisa and Giuseppe, but they are too late; as the clock strikes midnight, Giuseppe breaks into the wall, and a bolt of lightning strikes the damaged barrier. The entire wall collapses into the sea, and Giuseppe is swept along with it to his death. Before Sarah can stop her, the grief-stricken Louisa leaps over the cliff after her love. To make matters worse, the one-armed Max Vilmio claws his way out of the wreckage, free at last -- and there’s nothing the Doctor can do about it. As Vilmio walks off into the night, the Doctor and Sarah return to the TARDIS and set off back to the 20th century. The Doctor, understanding that Sarah is still grieving for Louisa’s death, tells her a story about his hermit mentor, and Sarah feels a little better when he’s finished; not a lot, but a little. Louisa won’t be a ghost forever.

The Doctor now knows that it was the astrological influence of Clancy’s Comet -- “the wing of the dragon” -- which tugged open the barrier, and now he has some idea of how to fix the crack. Meanwhile, as Sarah mourns Louisa’s death and even more tragic afterlife, Jeremy asks her if he can join her and the Doctor in the TARDIS the next day. But they won’t be using the TARDIS; instead, they must travel into N-Space to separate Vilmio’s physical body from his N-form, in order to prevent him from breaking back through the barrier after the Doctor seals it.

The next day, Sarah arrives late at the clifftop, after listening to Roberto’s singing. Before departing, the Doctor warns the Brigadier to expect more attacks from the fiends, as the barrier has nearly reached the point of catastrophe. He and Sarah then pass through the barrier and enter N-Space, which has been remade in Vilmio’s image -- and is now a vision of Hell straight out of Hieronymous Bosch. It seems nothing can stop Vilmio, the new Emperor of Hell, but the Doctor confronts him nevertheless, armed with nothing more than his faith and his sonic screwdriver. In Vilmio’s frame of reference, the sonic screwdriver becomes a sword, and the furious Vilmio attacks the upstart Doctor who denies Vilmio’s worthiness to rule. When the Doctor seems to be gaining the upper hand, Vilmio orders the fiends to kill him -- but the Doctor vanishes, and the frustrated fiends turn on Vilmio, driving him back onto his own sword. The Doctor reappears, explaining to Sarah that he entered a state of deep meditation; there was thus no self for the demons to attack, and they turned on the only being they could find. The Doctor returns to Earth to seal off the barrier, unaware that Sarah is not following. There is something she must do first…

While Mario watches over the Doctor and Sarah, the Brigadier, Roberto and Jeremy set off to collect the guns from Vilmio’s unconscious thugs. Before they can do so, however, several more fiends emerge from the barrier and are absorbed into the thugs’ bodies -- and the thugs recover, now possessing the powers of N-forms and still believing they must capture the castello. Jeremy, however, has an uncharacteristically clever idea; he shoots one of the thugs from hiding, causing the man to instinctively blast down the nearest man with a weapon, who shoots back and hits another of the thugs… By the time the cascade effect has died out, all of the thugs have blasted each other into ashes.

The Doctor awakens and wires the TARDIS’ spacetime warping template into his dimensional transducers, intending to use the TARDIS as a substitute for Clancy’s Comet and thus seal the barrier. Just as he’s about to do so, however, Jeremy points out that Sarah has not woken yet; if the Doctor closes the barrier before she returns from N-Space, she’ll be trapped there forever. The Doctor returns to N-Space to find Sarah, who has gone in search of Louisa’s shade. She helps the weeping girl to remember and accept what happened to her, and leads her to a tunnel of light, where Louisa is finally reunited with her lost loved ones -- her mother, her father, Paolo, and even Giuseppe. The Doctor returns and gently leads Sarah away from the reunion, telling her it isn’t her time to stay yet.

The Doctor and Sarah awaken, but before the Doctor can seal the barrier Vilmio returns, having recovered, reunited his bodies once again and brought the fiends with him. Upon his arrival, the barrier shatters completely, and as the fiends pour into the countryside, Vilmio prepares to kill the Doctor once and for all. The Doctor begs Vilmio to spare his life and offers to act as his consigliere, helping him to negotiate with the other Lords of the Galaxy. Vilmio, however, refuses to bow down to any other entity, and when the Doctor warns him that he doesn’t have the power to face the other rulers of the galaxy, Vilmio angrily calls all of the surrounding fiends to him. He draws them into himself, growing larger and more powerful, and larger still, until… the Doctor quietly operates the warping template. Strained to breaking point, Vilmio’s body explodes in a rush of energy, harmlessly dissipating the power of the fiends into space while the crack in the barrier is sealed.