The adventure continues with Princess Irene and Curdie a year or two older. They must overthrow a set of corrupt ministers who are poisoning Irene's father, the king. Irene's grandmother also reappears and gives Curdie a strange gift. A monster called Lina aids his quest. In the years since the end of The Princess and the Goblin, Curdie has managed to convince himself that the supernatural events of that tale were products of his wild imagination. But then events draw him back to Grandmother -- that is, Mother Wotherwop, Princess Irene's great-great-great-grandmother, the Lady of the Silver Moon -- and Curdie regains his innocence and his faith. The Lady sends him on a quest to help the king and princess confound their enemies -- and save the kingdom!

Anne Thaxter Eaton writes in A Critical History of Children's Literature that The Princess and the Goblin "quietly suggests in every incident ideas of courage and honor."