Gwydion, Crown Prince of Prydain, begins a mission to steal the Black Cauldron from the evil sorcerer Arawn, who rules over the neighboring land Annuvin. Arawn uses the cauldron to create evil and deathless warriors. Gwydion's plan fails because the cauldron has already been stolen. Taran and his friends decide to search for the cauldron. They come to the Marshes of Morva, where Taran is forced to sacrifice a prized possession to gain the cauldron. They begin to transport it back to Caer Dallben, but the cauldron is stolen by Ellidyr, one of their companions who is desperate for glory. They are all caught by King Morgant, who covets the power of the cauldron for himself. Ellidyr realizes he has acted badly, and so sacrifices his own life to destroy the cauldron. King Morgant is defeated by Gwydion's army.

Taran is working as an Assistant Pig Keeper when Gwydion and other men arrive at the farm to discuss their plan to steal the cauldron. Taran is included, but he is to remain back from the fight with Ellidyr and Adaon. Eilonwy, Taran's friend and scullery maid at the farm, is furious that she has not been included. When Taran, Ellidyr and Adaon remain behind to guard the horses, Eilonwy and Taran's friend Gurgi join them, refusing to be left out. That night, however, the group is attacked by Arawn's Huntsmen and they are forced to flee. Fflewddur Fflam the bard and Doli the dwarf join them, and explain that the plan has failed because the cauldron has already been stolen.

The companions take shelter in one of the wayposts of the Fair Folk. There they find out that the Black Cauldron is actually in the Marshes of Morva. They decide to go after it. However, Ellidyr, anxious for glory, abandons them to try to find the cauldron on his own. Later, they are attacked once again by the Huntsmen, and Adaon is fatally wounded. He gives Taran his brooch. Taran soon finds that the brooch has magical powers bestowing wisdom and understanding. He uses the brooch to guide them all safely to Morva.

At the marshes they find the cauldron in the hands of its original owners, the three enchantresses Orgoch, Orwen, and Orddu. Taran is forced to sacrifice the brooch in order to win the cauldron. However, the cauldron proves to be very difficult to destroy. Orddu explains that it can only be broken if a person willingly climbs in, knowing they will not climb back out alive. Taran and his companions decide it would be best to take the cauldron back to Caer Dallben and let Gwydion decide what to do with it. They tie it to their horses and begin to carry it back to the farm.

However, when they are crossing a river, the cauldron slips and becomes stuck in the mud. At this point, Ellidyr finds them. Taran asks for his help, but Ellidyr refuses to give it unless they agree to let him have all the glory for finding the cauldron. Taran agrees, though he is upset about it. Ellidyr helps to drag the cauldron up onto the bank, but then decides that Taran and his friends mean to break their oath. He wants all the honor for himself, so he turns on them and tries to kill them. Taran falls into the river and is swept away, and the others run from Ellidyr. Ellidyr gets away with the cauldron.

As the friends are returning home, they run into King Morgant's camp. Morgant intercepted Ellidyr and now has him and the cauldron. King Morgant has become a traitor, desiring the power of the cauldron for himself. He ties them up and tries to persuade Taran to join his side. Taran refuses, and Morgant says he will kill them and force them to be Cauldron Born warriors enslaved to his will.

Just as things are looking really bad, Doli arrives, turning invisible to sneak in and undo their bonds. Ellidyr, anxious to redeem himself for his bad behavior earlier, runs out of the tent and throws himself into the cauldron. The cauldron is destroyed. Gwydion and King Smoit's men arrive and defeat Morgant, and the realm is saved. Taran realizes that friendship and a good, peaceful life can be more important than honor and glory. He happily returns home with his friends.