Bahamut Lagoon puts the player in the shoes of Byuu and his party, who are Bikkebakke, Rush, and Truce, and other parties, each represented by a dragon. The dragon representing his party is called Salamando. In Bahamut Lagoon, dragons are known to eat anything, such as weapons, armors, and books.
The story takes place in the sky world called Orelus. It begins at the prologue, the downfall of the kingdom of Kahna. The Kingdom of Kahna gets conquered by Granbelos Empire, headed by Emperor Sauzer. After the prologue, a horrible war begins. After that horrible war, Chapter 1 begins, with the rebel alliance called The Resistance, headed by Byuu and backed by Matelite, being shaped up. Their flagship is called the Farnheit. If the Resistance fails to win that war, the Grandbelos Empire will oppress Orelus.