The Captain reveals that he is a traitor who revealed the gargoyles' secret to Hakon and his men and they quickly capture the unprotected castle. Goliath awakens and he and the elder gargoyle return to Wyvern, to discover only the three young gargoyles and their canine companion were the only survivors of the destruction of their kind. The gargoyles hunt them down and attack, sparing the humans from the castle and focusing only on the armed men. Hakon and the Captain take the princess, intent on killing her, but Goliath intervenes. The Captain reneges on his treason and attacks Hakon, causing the two of them to plummet down the cliff to their death, cheating Goliath of his vengeance. Meanwhile, the others confront the Magus, a soft spoken wizard who thinks the princess was already killed. In his grief he casts a spell to bind the gargoyles in their stone sleep. When Goliath and the princess come to him, he collapses in despair, saying the reversal spell had been destroyed and the only way to break the spell is for the Castle Wyvern to be raised above the clouds. Goliath, unsatisfied with having to live alone, asks the mage to cast his spell one last time.
A thousand years pass as Goliath and the others are trapped in their stone sleep until they are awakened by David Xanatos, a very rich and powerful man who claims he only wants to help the gargoyles. He shows them around the newly refurbished castle, planted on top of a skyscraper to bring the castle above the clouds and break the Magus' spell. He reveals he has the spell book--the Grimorum Arkanorum--which tells of their story. Several armed men attack the castle, and the gargoyles defend the castle as they had long ago, but their attackers manage to escape, taking a trio of disks with them. Down below, New York detective Elisa Maza decides to investigate the disturbance. After eluding Xanatos' assistant Owen, she encounters Goliath, and the shock sends her off the edge of the castle. Goliath soars down and catches her, but can only glide on drafts of wind so he climbs up the tower with her on his back. He urges her to leave when he notices the sun rising, but she gets him to agree to see her again.
Goliath and the others are called to Xanatos, who explains that the stolen disks contain crucial data for his company and he employs their help to get them back. Goliath tentatively agrees and the group leaves in anticipation of the sunrise. Xanatos turns toward a shadowy figure stating that "Everything is going according to plan." Meanwhile, the gargoyles wonder about their place in this new world as they turn to stone.