The fantasy setting of The Magic of Scheherazade borrows from Middle Eastern folk tales in One Thousand and One Nights. Many years prior to the opening of the game, the land of Arabia was taken over by the malevolent demon Goragora and his army of minions. A magician named Isfa, harnessing the power of the blue star Airosche, vanquished the demons and sealed them underground. Peace briefly returned until the evil wizard Sabaron freed Goragora and the demons from their captivity and imprisoned the Arabian princess Scheherazade and her family.