At the end of his penance term of 20 years, Templar Arn expects to return home with an honorable discharge from the late grandmaster after a last desert mission, during which he must defeat fellow knights to prevent Bedouin allies being slaughtered. The grandmaster's successor tears it up, claiming victory over Saladin is at hand and imposing foolish risks. In Sweden, his bride Cecilia is offered to succeed the wicked abbess, who dies cursing her for refusing to forgive. However she chooses to leave, visit their son Magnus, now a man, and seeking to find and marry Arn at last.

The haughty grandmaster's expedition ends as disastrously as Arn warned: the crusader army is annihilated by Saladin's at the battle of Hattin. The sultan's brother however rescues badly wounded Arn from the battlefield, nurses him to health and accompanies him home to Sweden. They arrive just in time to prevent Cecioa, who was told all Templars were dead, accepting to becoming abbess for the family's political sake. Their patriarchs' objections result in the bishop forbidding a wedding, but the archbishop undoes that after an intervention from the bride's friend, Knud's queen. The happy couple is now united with their strapping son Magnus, squire to the Folkung patriarch.

After happy years for Arn and his finally reunited family, king Knut is dying, spelling a bloody civil war. Fearing a Danish intervention would be fatal, the Folkungs arrange a deal by which Karl, whose father's throne Knut re-usurped, succeeds but must adopt Knut's firstborn Erik as crown prince. Rightly suspecting foul play, Arn sends his Danish former Templars squire along as supposed turncoat, in fact Eric's bodyguard. After he prevents Eric and his brothers, one of which is however slain, being cowardly drowned, Arn takes command of a revolt, heading for an epically bloody battle.