Schmendrick, Molly Grue, and the Unicorn (now in human form) proceed to Haggard's castle and seek entry. King Haggard is at first unwelcoming, and Schmendrick introduces the Unicorn only as his niece Lady Amalthea. Schmendrick requests that the three of them stay there as members of Haggard's court, only to be told that all of the royal complement has long since been dispatched: the only remaining occupants in the castle are Haggard, his adopted son Prince Lír, and four ancient men-at-arms. Haggard consents to lodging the trio, replacing his more competent on-call wizard with Schmendrick, and setting Molly Grue to work in his scullery.
After a while, Amalthea begins to forget her identity and her reasons for coming to the castle, and eventually falls in love with Prince Lír. Caught in a complex web of newfound emotions, she struggles with thoughts of abandoning her quest for the sake of mortal love.
Haggard confronts Amalthea in private conversation, hinting at the location of the unicorns, yet from the waning magic in her eyes, he has doubts regarding his previous suspicions that she is more than she seems. Molly ends up learning some clues on the location of the Red Bull's lair from a talking cat.
Going through a secret passage in a broken clock in the castle basement, Schmendrick reveals Amalthea's true identity to Lír after a talking skull identifies Amalthea's true form. Lír, however, isn't surprised at all and says that he loves whom he loves. This makes Amalthea want to stay human and marry Lír, but Lír thinks otherwise. The Red Bull soon appears, but is no longer deceived by Amalthea's false human form and chases after her. In an attempt to assist her escape, Schmendrick turns Amalthea back into the Unicorn, but she is unwilling to leave Lír's side. The Bull drives her toward the ocean, just as he earlier drove all the other unicorns, but she manages to run away and the bull gives chase. Lír gets between them and blocks the bull's path, but the bull doesn't stop and Lír is killed. Out of grief, the Unicorn aggressively turns on the Bull and forces him into the sea. Carried on the white surf of incoming tides, the other unicorns emerge en masse from the water, causing Haggard's castle to collapse into the sea as they rush past, with Haggard falling to his death from the crumbling castle parapet.
In the spongebob series, King Haggard reprises his role from the film, having been recruited by the Villain League in order for them to gather enough pure unicorn souls to offer to Malefor as sacrifices to his ever growing power.