The Dark City, ruled by Xayide the Dark Princess, is situated on the far edge of Fantasia. It is built on a desolate, treeless island that floats on a lake of fiery, deadly lava. Dark City is connected to Fantasia by a land bridge.

The city is an industrial wasteland of bleak streets, factories and uniform blocks of buildings. Xayide's Seeing Hand Palace dominates the skyline of Dark City. It is a frightening, giant fortress that takes up three-quarters of the space on the island. The interior of the Seeing Hand Palace is made of rock and metal. It is stark, minimalist and contains the latest high-tech surveillance equipment. This is used by Xayide to spy on the comings and goings of Fantasians. Under the city are the dungeons, filled with prisoners, and deeper down is an electric power station, in which Falkor, Fantasia's Luckdragon, is chained and tortured.

All the people and creatures that live in the Dark City are under the evil command of Xayide. There are the Dark Knights, seven feet tall and terrifying. They wear heavy, black armour and fight with swords and battleaxes. Helmeted and armoured Guards watch over Falkor and the prisoners. Drones work in the city's factories. They are people from Fantasia who have been captured by the Dark Knights, and zapped by Xayide's evil force, The Nothing. They are grey and colourless and have no memories left of their previous lives. They are mindless, dreamless, emotionless and imagination-less slaves who quickly do whatever they're ordered to. And finally there are Servers who work inside Xayide's palace.

They are small Drones who don't walk but roll as they carry out their duties. They are mindless, dreamless, emotionless and imagination-less slaves who quickly do whatever they're ordered to. And finally there are Servers who work inside Xayide's palace. They are small Drones who don't walk but roll as they carry out their duties. Xayide's right-hand man and personal servant of evil is the Werewolf Gmork, half wolf, half man. He can change shapes and can shift from wolf to bird to man. He can look like a beautiful young girl and even like Fantasia's hero, Atreyu.