After the events of Full Circle, the Doctor's adventures in E-Space continue with the Doctor, Romana, K-9, and their newest companion/stowaway, Adric, arriving on a planet experiencing what appears to be a feudal period. The villagers live under the thrall of three lords—Zargo, Camilla, and Aukon—who dwell in a shadowy Tower. Adding further fear to their lives, they experience a yearly ritual called "the Selection," in which a sample of young villagers are taken to the tower, never to be seen again. This selection process is enforced by a thuggish band of guards led by Habris.
The Doctor and Romana venture out into the village (not knowing that Adric is following them), and discover evidence of technology considerably more advanced than the medieval level. With such technology, the Doctor and Romana wonder what happened in the course of the planet's development to cause it to evolve "backward" to its current rustic condition—to be in a "state of decay." As the two head out of the village they are seized by cloaked figures.
Their captors convey them to a secret base filled with illegal computers and other technology. Kalmar is a scientist - a heretical role in their society - and is very grateful for the Doctor's help in repairing a computer which proceeds to reveal the names and faces of the original chief officers of the spaceship Hydrax - who look exactly like the Lords of the Tower.
The Lords too have learnt of Romana and the Doctor, and Aukon sends a flock of his winged servants, bats, (aka "The Wasting") to menace them. The Doctor and Romana are now seized by Habris and his guards and taken to an audience in the Tower. Zargo and Camilla entertain them for a while, then are called away to deal with a situation called the Arising. The Doctor and Romana snoop around and discover that in fact, the great Tower in which the Lords dwell is itself the spaceship Hydrax, originally from Earth, which also was pulled into E-Space long ago.
The Doctor and Romana discover rows of drained corpses, while the craft's fuel stores are full of blood. Talk turns to vampires. They head downwards and find an amphitheatre. It is there that the Lord Aukon greets them, inviting them to become the first of the new servants of the Chosen Ones. When they refuse, they are imprisoned.
The Doctor deduces (by applying principles of consonant shifting) that the current lords' names are a corruption of the original crew names (e.g. "Sharky" becomes "Zargo"). Thus the Doctor realizes that the three lords might not be descendants, but members of the original crew themselves. He is reminded of ancient Time Lord stories of the Great Vampires, a giant race of rapacious, destructive, and powerful creatures that were ancient enemies of the Time Lords. He deduces that the Great Vampire escaped destruction at the hands of the Time Lords by somehow retreating into E-Space, and it managed eventually to gather enough power to pull the old Earth ship into this universe and corrupt the crew.
Meanwhile, Adric's attempts to mingle with the natives have led to him getting caught up in the Selection. He is put under a hypnotic trance by Aukon and accompanies him to the tower. Aukon plots to change Adric into the new Chosen.
Another rebel named Tarak attacks the Tower, freeing the Doctor and Romana. The Doctor returns to the TARDIS, while Romana stays with Tarak to search for Adric. As they try to snap Adric out of his trance, they unknowingly awaken Zargo and Camilla. Tarak is killed by Zargo, who then goes after Romana. Camilla advances on Adric.
Aukon orders them to stop. He wants Adric as a Chosen One and Romana, a Time Lord, for sacrifice at the Arising.
Romana and Adric argue about their fate. Adric says if it's a choice between death and joining the diners that means there's no sense in two of them getting the chop. Romana asks Adric if he knows what happens to vampires when they die. Adric smugly replies "But they don't die, do they Aukon!". They are taken to the bottom of the Tower (as shown in the picture above).
In the TARDIS the Doctor and K-9 review the old stories about vampires. The lore that the Doctor and K-9 uncovers determines that the Great Vampires could only be defeated by metal bowships driven through their chests (rather like the wooden stakes that work on lesser vampires). He takes the craft to Kalmar's base and there uses scanning equipment to scan the Tower. Under the lake of blood he finds a restless, demonic presence, whom he determines to be the last Great Vampire. He warns it is about to be revived. Kalmar, Ivo and many other villagers agree to help.
The villagers and K9 make an assault on the Tower itself, killing collaborator guards. The Doctor heads off to the peak of the Tower. Inside, Adric reveals he was faking his conversion to arrange an escape, but is unable to revive an entranced Romana. The Doctor, in a burst of characteristic ingenuity, rigs one of the spaceship/tower's old scoutships to launch and fall back toward the ground, driving itself into the heart of the subterranean Great Vampire.
With the Great Vampire dispatched, the three vampire Lords crumble to dust. The Doctor finds Romana and Adric and they leave the planet, hoping that, now freed from the corruptive effect of the vampires, it will develop once again toward its former advanced state and even perhaps surpass it.