Phillipe "The Mouse" Gaston (Matthew Broderick), a thief, has been thrown into the dungeons of Aquila in medieval France, which are reputed to be inescapable. Sentenced to death, he escapes through the prison sewers and away from the city. He frequently talks to God about his woes and concerns.
The evil Bishop of Aquila (John Wood), the harsh ruler of the region, sends his captain of the guard, Marquet (Ken Hutchison), after Phillipe to kill him. Marquet and several guards soon find Phillipe. As they are about to kill him, a strange knight in black appears. Phillipe is rescued by the knight, Etienne Navarre (Rutger Hauer). When a guard recognizes Navarre, Marquet kills the guard. Navarre fights the guards and takes Phillipe away. Marquet reports back to the Bishop. During the interview, the bishop's crozier is seen to have a hidden spearpoint in the end.
The enigmatic Navarre is accompanied only by a hawk. Because Phillipe escaped from Aquila, Navarre wants the thief to help him enter Aquila so he can kill the Bishop. Phillipe has no desire to return to his death sentence, but Navarre threatens to kill him if he will not help.
Navarre and the hawk mysteriously vanish at night, and a beautiful woman (Michelle Pfeiffer) joins Philippe. Sheltering in a barn, they are attacked by a peasant but saved by a large black wolf. In the morning, Navarre and the hawk reappear, and at night, the lady and the wolf again accompany Phillipe.
Phillipe is caught by Marquet's men as a conduit to Navarre. When Navarre turns up, he and the hawk are both hit by crossbow bolts. Navarre fights off the guards and has Phillipe rush the injured hawk to the nearby castle ruins of an old monk named Imperius (Leo McKern). The monk works to heal the hawk, but Phillipe later spies his nocturnal female traveling companion in the sickroom, sporting a crossbow wound. Imperius explains that Navarre was once the captain of the guard in Aquila, and the woman, Isabeau, loved him. She confessed her love to her priest, whom at the time was Imperius himself. Sadly, he got drunk and betrayed the couple one night to the Bishop, who coveted Isabeau for himself. The jealous Bishop cursed the lovers with black magic, making Navarre a wolf by night and Isabeau a hawk by day. In their human forms they do not remember anything about their activities as animals and can never touch each other as humans and are so forbidden to be together. The curse may only be broken if both Isabeau and Navarre can face the Bishop together in their human forms. The only possibility for this plan to succeed, according to Imperius, is during a solar eclipse, which will occur in a few days.
Some of Aquila's guards attack Imperius' retreat, stranding Phillipe and Isabeau on the roof at daybreak. Isabeau nearly falls from the tower and hangs on as Phillipe desperately tries to pull her up. She falls and becomes a hawk and escapes, while Navarre regains his human form and kills the guard.
Imperius reveals that the curse can be broken if the Bishop sees the couple together in their human forms. This seems impossible, but he says that within days there will be a solar event making this possible. Navarre is unwilling to trust Imperius, and intends to follow his own plan.
In the city, the Bishop recruits a man named Cezar (Alfred Molina), to hunt black wolves in the countryside. The Bishop describes the wolf that Navarre becomes each night, and demands the pelt. Cezar's wolf pelt collection grows, and when Isabeau sees them she goes to attack Cezar. Navarre the wolf arrives, and Cezar ends up dying in one of his own wolf traps.
Finding Navarre stubborn, Phillipe convinces Isabeau that the couple should try to break the curse. Phillipe, Isabeau and Imperius decide to show Navarre how Imperius' idea might work. The men dig a hole for the lovers to sit in and await the day. While crossing the river to reach the group, the wolf falls through the ice. As Phillipe tries to pull him out, the wolf's claws slash his chest in panic before they reach safety. In the morning, Isabeau is hidden from the sun on one side of a snowbank, so that she does not transform. On the other side, the wolf is struck by sunlight and transforms into Navarre. They are amazed to see each other, but in seconds Isabeau transforms into a hawk and flies away. Navarre is crushed, and then angry. However, when he learns that Phillipe rescued him from the deadly river during the night, he apologizes, and agrees to try to break the curse.
They decide to openly bring Navarre into the city in his wolf form as a present for the bishop. Imperius and Isabeau enter the city in a wagon, carrying the wolf Navarre in a cage. Since Phillipe is a wanted criminal, he hides under the cart.
As the eclipse begins on the following day, it is time for Navarre to see the Bishop to break the curse. The Bishop will be conducting mass in the cathedral, and the main doors will be bolted shut. Phillipe is charged with sneaking into the cathedral through the sewers to unlock the doors. Worrying that the whole enterprise may fail, Navarre tells Imperius to kill the hawk when the bells ring at the end of mass, if Navarre has not returned. After Phillipe unlocks the doors, Navarre rides his horse right into the cathedral.
While fighting the guards, a window breaks and the solar eclipse shows through. Someone rings the bell, which was to be the signal to Imperius to kill Isabeau. Marquet attacks Navarre and furious fight ensues. Navarre is eventually able to kill Marquet. Devastated because he believes Isabeau dead, Navarre resolves to kill the Bishop. Suddenly, Isabeau appears in human form, holding the leather strapping used to bind her as a hawk. She drops it victoriously at the Bishop's feet. All activity in the room stops, and everyone stares at the couple, including the Bishop, whom is forced to look at Isabeau by Navarre. The curse is broken.
The Bishop sees his plan foiled, and resolves to use his crozier-spear on Isabeau to keep the lovers apart. To stop him, Navarre hurls his sword, impaling the Bishop against his throne. The lovers are finally together in their human form, and Phillipe and Imperius look on in approval.