On the war-torn planet Eternia, the evil warlord Skeletor (Frank Langella) has seized control of Castle Grayskull, the center of power in the universe. His army has scattered the remaining Eternian defenders and Skeletor has captured the Sorceress of Grayskull (Christina Pickles), imprisoning her within a power-draining field and planning to seize power over the entire universe by the next moon-rise. Skeletor's archenemies - the warrior leader He-Man (Dolph Lundgren), veteran soldier Man-At-Arms (Jon Cypher) and Man-At-Arms' daughter Teela (Chelsea Field) - rescue the Thenorian locksmith Gwildor (Billy Barty) from Skeletor's troopers. Gwildor reveals that Skeletor has acquired his invention: a "Cosmic Key" that can open a portal to anywhere by utilizing musical notes. The device was stolen by Skeletor's second-in-command, Evil-Lyn (Meg Foster), allowing Skeletor to breach Castle Grayskull.With Gwildor's remaining prototype of the Key in hand, He-Man and his friends travel to the Castle. They attempt to free the Sorceress but are overwhelmed by Skeletor's army and forced to flee through a hastily opened portal via Gwildor's Cosmic Key, transporting them to Earth. The Key is lost upon their arrival and discovered by two California teenagers - orphaned high school girl Julie Winston (Courteney Cox) and her boyfriend Kevin Corrigan (Robert Duncan McNeill). While experimenting with the device, they accidentally transmit a signal that allows Evil-Lyn to track it. She then sends Skeletor's henchmen Saurod (Pons Maar), Blade (Anthony De Longis), Beast Man (Tony Carroll) and Karg (Robert Towers) to recover it.Kevin, an aspiring musician, believes the Key to be a new Japanese synthesizer and takes it to a music store run by his friend Charlie (Barry Livingston). Back at the school, Skeletor's henchmen arrive through a portal and chase Julie until she is rescued by He-Man, who is in search of the Key. The henchmen retreat to Grayskull where, incensed by their failure, Skeletor kills Saurod and sends the others back to Earth, with a larger force under Evil-Lyn's command. Meanwhile He-Man explains the whole situation to Julie. He says that their only hope to defeat Skeletor is to find the Cosmic Key.Back on Earth, Kevin returns to the school to find police investigating the damage caused by Skeletor's men, and no sign of Julie. Kevin is then taken to Julie's house by Lubic (James Tolkan), a detective investigating the disturbance. They find no trace of her at the house, but Lubic is suspicious of the Cosmic Key, which he suspects Kevin may have stolen. Lubic confiscates the Key and leaves for Charlie's music store to verify Kevin's story. Immediately afterward, Evil-Lyn and her team break into the house and interrogate Kevin regarding the Key's location using a mind-control collar, before pursuing Lubic.Julie and the Eternians arrive and release Kevin from the collar, then pursue Lubic and the Key. They arrive at Charlie's store, but Skeletor's forces catch up with them and a pitched battle ensues. Evil-Lyn recovers the Key and summons Skeletor to Earth. Lubic escapes to gather extra forces to return and arrest everyone. Skeletor continues to pursue He-Man and his friends. He-Man recovers the Key from Evil-Lyn. Skeletor's forces capture the Eternians and Julie is wounded by Skeletor's lightning blast, which simultaneously erases the memory storage of Gwildor's Key, which held the home location.He-Man surrenders to save his comrades and is returned to Eternia as Skeletor's slave. Skeletor attempts to torture He-Man into submission to make his victory complete, but He-Man refuses to yield. The moment arrives for Skeletor to receive the power of the cosmos and declare himself the Master of the Universe. He uses his new powers to attempt to force He-Man to kneel.Back on Earth, Gwildor repairs the Cosmic Key and Kevin re-creates the tones necessary to create a gateway to Eternia. The group, including Lubic as he attempts to arrest them, are transported to Castle Grayskull, where they begin battling Skeletor's forces. Resenting that Skeletor absorbed the power of the Universe without sharing it with her, Evil-Lyn deserts him along with his other henchmen. He-Man retrieves the Sword of Grayskull and he and Skeletor begin a final battle, in which he shatters Skeletor's staff, restoring him to his normal state. He-Man offers mercy, but Skeletor draws a concealed sword and attempts to kill He-Man. As Skeletor lunges at him, He-Man knocks Skeletor into a vast pit below. The freed Sorceress heals Julie and Gwildor opens a portal to send the Earthlings home. Hailed as a hero for his bravery, Lubic decides to remain on Eternia.Back on Earth, Julie awakens on the morning of her parents' deaths in a plane crash. Realizing the Key has transported her back in time, she prevents her parents from taking the ill-fated flight by taking their keys, then runs outside to find Kevin. He confirms that their experiences were real, producing a souvenir from Eternia: a small blue sphere containing a scene of He-Man in front of Castle Grayskull with his sword raised above his head.In a post-credits scene, Skeletor's head emerges from the water at the bottom of the pit, saying "I'll be back!"