Jake and his grandfather travel to the island of Draco, the headquarters for the World Dragon Council. There he learns that the council is displeased with his use of his dragon powers. They decide to give him a three-part test to see the worth of his training; if he fails, his grandfather will no longer be his trainer. Complicating his tests is another young dragon - Fred Nerk, the Australian Dragon - who is busy conducting a practical joke war with Jake. And lurking in the bowels of the island's volcano is an enemy to all dragons that everyone but Grandpa thought was long dead.