In the fantasy world known as Urak, supporters of eight different religions constantly fight each other. One of them is Balkoth, known as the Lord of Death, who worships the dark deity Golgoth. Balkoth has sworn to destroy all other faiths in the name of his own god. The other lords have to expand their ranks and defend themselves against the mad zealot.

Lords of Magic is a strategy game that combines turn-based exploration and resource management with real-time combat. The player can choose to control any of the lords who oppose Balkoth. Each nation (faith) commanded by a lord has its own specific units. Before engaging in an offensive, the player must liberate a Great Temple for the faith of his/her choice. It is also necessary to build a stronghold, develop the nation's capital city, and recruit troops.

The troops are led by a champion, representing the "hero" of the game. This hero can be either a warrior, a thief, or a mage, possessing the classical advantages and disadvantages of these classes: the warrior is good in close combat, the thief can sabotage enemy armies, and the physically weak mage can cast devastating spells. The isometric combat proceeds in real-time, with an option to simply calculate the result of a battle immediately, depending on the participants' statistics.