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The game is set in the Second Era, in 2E 583, during a period of time known as the Interregnum. It was a period of time known for its political instability. Daedric Prince Molag Bal has taken advantage of this instability to try and pull all of Tamriel into his realm of Coldharbour. The Daedric prince is doing so by sending devices called "Dark Anchors" into Tamriel. The Fighters Guild have taken it upon themselves to remove them.

The Tharn family, current rulers of Cyrodiil through Empress Regent Clivia Tharn, has made a pact with, Mannimarco, The King of Worms, who has agreed to supplement the Imperial's forces by resurrecting their soldiers. Secretly, Mannimarco is conspiring with Molag Bal, the Daedric Prince of Corruption and Domination, to take over Mundus. Molag Bal is also harvesting the souls of mortals. The Hero, known as the Soulless One, is an adventurer whose soul has been taken, which allows them to constantly return to life.

It is a time of strife and unrest. Armies of revenants and dark spirits manifest in every corner of Tamriel. Winters grow colder and crops fail. Mystics are plagued by nightmares and portents of doom.

Four years ago, in 2E 578, an arcane explosion of energy in the Imperial City set off mystical aftershocks that swept across Nirn. Mages died or went mad. Supernatural abominations from the plane of Oblivion, the Daedra, appeared in greater numbers than ever before. The constellation of the Serpent grew so large that it dominated the night sky.

So began the grand scheme of Molag Bal, Daedric Prince of domination and enslavement. His Dark Anchors, vortexes of evil magic, weaken the barrier between worlds, threatening to merge Nirn and Oblivion into a single, nightmarish hellscape.

In the midst of this chaos, three alliances vie for control of the Imperial City and the White-Gold Tower. High Rock, Sentinel, and Orsinium stand as one, united under the rule of the High King in Wayrest. Valenwood and Elsweyr have forged an alliance of their own with Summerset, while Black Marsh, Morrowind, and Skyrim have formed a third, uneasy pact.