In the Smurf Village, all is peaceful with the Smurfs working in harmony with each other until there is a fire in the village. Something is causing the forest to be set ablaze, and the Smurfs are working hard to keep their village from being burned down. Two Smurfs, Hefty and Smurfette, are running into the forest when Smurfette slips and falls into a mud puddle in the middle of the road. Hefty tries to get her out while a traveler stops his cart and grabs the two Smurfs, saying that they will fetch him a pretty penny.
In a nearby castle, a young jester named Peewit is trying to entertain his king with jokes, with funny faces, and with singing, but the king doesn't respond to anything Peewit does except with a look of boredom. Feeling frustrated that his efforts aren't working, he turns to his friend Johan, who says that he has hired a traveling carnival complete with jugglers in the hopes that the king will be entertained. Unfortunately, even the traveling carnival fails to put a smile on the king's face. After the last attempt with a minstrel had failed, the traveler seen earlier enters the court room with something that he claims the king has never seen before: two Smurfs that he has put in a cage. Johan sees them and says that creatures like that should never be put in a cage, though the traveler claims that he bought them from a woodcutter. Johan offers the Smurfs two crowns that they can give to the traveler for their freedom, and so the traveler receives the crowns, disappointed in his efforts as he leaves.
After Hefty and Smurfette try to explain where they come from and what they were doing, Johan and Peewit decide to go into the forest to find whatever it is that's setting fire to their village, with the king tagging along, saying that he needs some excitement, although the only thing he provides is a constant nuisance. Their first stop is at the humble abode of Homnibus the enchanter, where the two Smurfs try to tell the elderly human what's going on in their village. None of the humans could understand Smurf, though, so Homnibus turns to his crystal ball to find the answer. The two Smurfs then see an image of Papa Smurf sitting inside a cave, looking like he's being held prisoner. They cry out to him, but Homnibus tells them that he can't hear them because this is only an image of him. Johan wonders where the other Smurfs are, but Homnibus says it's something he cannot answer, so Johan declares that they shall find out. Before the three humans and the Smurfs leave, Homnibus gives Johan a magic stick with which he can use to cause water to appear. simply by striking the ground and saying "alakazam!" Peewit is too eager to try it out, though, and so causes water to come out of the floor of Homnibus' house, making Peewit wonder if there's a way that he can get the water to stop flowing, to which Homnibus answers that there isn't.
Leaving Homnibus to bail out the water in his house, Johan, Peewit, and the king begin their journey with the Smurfs to find their village -- a journey that turns out to be a very long journey through a thick dense forest and then across a barren desert, in which the humans begin to suffer from thirst. Johan says that it's time to use the magic stick, and so Peewit strikes the ground and says the magic word to make a spring appear. But as the king tastes the water from the spring, he spits it out, saying that it's salty. Peewit tries it himself and finds it to be also salty, and a few more ground strikes to create springs don't produce any better results. After they find a running spring of fresh water, the three traveling humans soon find the Smurf Village...or what's left of it, as it is now in charred ruins. Johan promises that he will find whatever it is that has caused this disaster.
Then they hear a fierce growl and see the "whatever it is" has found them -- a dragon that is breathing fire. Johan tries to block the flames with his sword, but finds that the dragon's breath is too hot to handle. Instead, Johan lures the dragon between two narrow trees, where he got himself stuck, unable to get himself out. After catching Peewit from falling down a tree he has climbed up to escape the dragon, he joins his friend in hiding as he watches the dragon loose himself and them go off in another direction. But as Johan looks to see where the king and the Smurfs are, he hears a cry of help from the king as he is being carried away by the dragon. The two Smurfs join Johan and Peewit as they watch the dragon fly off with the king and realize that they have to go after the dragon to rescue the king.
As Peewit reluctantly follows after Johan and the two Smurfs, a moustached man eating a piece of meat is soon joined by the dragon that he calls Fafnir, wondering where his pet dragon has found the "old buzzard" that he has now captured. The king tells the moustached man who he is and that Johan and Peewit are coming to rescue him. The presence of others coming intrigues the moustached man as he tells Fafnir to go and fetch them, and so the dragon flies off to do his master's bidding.
After watching Fafnir fly off, Johan, Peewit, Hefty, and Smurfette proceed further until they find the king's traveling hat lying on the ground next to a cave. Smurfette fears the worst, but Johan suggests that the king may have went into the cave to escape the dragon. After they enter, the four of them see the moustached man whipping the captive Smurfs and telling them to work faster or else Fafnir will roast them. After the man leaves, Hefty and Smurfette draw the other Smurfs' attention to them and the help they have found -- the two humans named Johan and Peewit. The Smurfs then tell who their mysterious captive is, Monulf, and that he is control of the dragon that destroyed their village. Smurfette asks where Papa Smurf is, and Clumsy says that Monulf must have him hidden in a cave somewhere. Johan believes that the king must also be hidden as well and so he grabs a torch and begins his search with Peewit and the Smurfs following him.
Soon they find Monulf's hideout, and Johan notices that the dragon tamer is more busy than he thought, having bags of diamonds sitting on his table, suggesting that he's been putting his captives to work as slave labor. But then Monulf appears and tries to get the jump on Johan, who ducks out of the way as the dragon tamer knocks over the table. After a brief struggle, Johan gets a hold of Monulf by his own whip and forces him to show where he had held the king and Papa Smurf captive. Monulf leads Johan, Peewit, and the Smurfs to a room inside the cave where they find the captives, with the king being ever so grateful that Johan and Peewit has found him.
Monulf leads the humans and the Smurfs to the cave entrance, but says that they won't escape. Peewit dares Monulf to tell him who's going to stop them when he starts feeling a little toasty, and then they realize that Fafnir is waiting outside the cave, breathing fire on whoever dares to leave through the entrance. Hefty goes and finds another way out, but says that it's only big enough for a Smurf. Johan, Peewit, and the king go to the passage to find out where this Smurf-sized passage goes, and soon the Smurfs return through the passage with things they have found in the forest, including Clumsy finding snapdragons, which gives Johan an idea. While the Smurfs go get as many snapdragons as they can, Johan has the king fetch firewood and Peewit fetch a cauldron. Monulf, however, continues to assert that the dragon will never let them get away.
With the snapdragons brewing in a cauldron, Johan says that if they can get Fafnir to drink the brew, then he will sleep like a baby. Monulf tries to warn Fafnir of Johan's plan, but Peewit silences him, and soon the snapdragon brew is ready and shoved out of the cave's entrance. Fafnir sniffs the concoction and drinks it, and before long he gets tired and nods off to sleep. As Johan, Peewit, the king, and the Smurfs escape through the cave entrance, Papa Smurf wonders how they're going to keep the dragon from becoming a danger when he awakens, saying that a dragon that cannot breathe fire is no longer a danger. Suddenly Johan has an idea: he carves out a portion of Homnibus' magic water stick and gives it to Papa Smurf so he can carry it into the belly of the dragon. After the three humans open Fafnir's mouth, Papa Smurf begins his fearful journey. But Fafnir doesn't remain asleep for long, and Monulf doesn't remain bound for long, as the dragon awakens and the dragon tamer attempts to regain control of his pet.
The three humans and the Smurfs hide in the rocks as Monulf tells Fafnir to roast them, but as Fafnir prepares to let out a fiery blast, he instead exhales water from his mouth. He tries again, but all that comes out of his mouth is water, and with the burst of water Papa Smurf also comes out, safe and sound, and pleased to have accomplished making the dragon breather water instead of fire. Monulf finds out that he no longer has any control of Fafnir as the dragon is no longer a threat since the only thing he can exhale is water.
After seeing the Smurfs safely return home to begin work on rebuilding the village, Johan and Peewit make their goodbyes to their new friends and then fly off toward the castle on Fafnir, sparing the king another grueling trip through the same way that they came to reach the Smurf Village. After putting Monulf in the dungeon, Fafnir rests in peace beneath the castle walls, though during the night the king finds himself awakened by his bedchamber being filled with water. He suspects that Peewit has been playing with the magic stick again, and Peewit humbly shrugs as he was found out.
- This episode is based on the original Johan And Peewit comic book story called "The Cursed Land" (its original French title being Le pays maudit), which was published in 1961. It originally refers to the land that the Smurf Village was located in being called the Cursed Land, which at the point of the cartoon show has become somewhat of an artifact title.
- This episode introduces the characters Johan and Peewit, who eventually become recurring guest stars in the Smurfs' own episodes after Season 2. It is also considered to be the first meeting of Johan and Peewit by the Smurfs in the cartoon show, whereas in the comic books their first meeting was in "The Smurfs And The Magic Flute", when the Smurf Village was originally located in the Cursed Land.
- Similar to the original comic book story, the way to the Smurf Forest required going through a vast barren desert, which disappears in later stories.
- Differences with the comic version are that only one Smurf managed to escape and it was neither Hefty or Smurfette since the both of them hadn't been developed yet. Also later in the story Johan and Peewit run across the traveler and offer Fafnir in exchange to make up for the taking of the Smurf. Saying that a tame dragon who spits water will earn him far more money than a Smurf.
- In the comic book, the lucky escapee Smurf had a far thicker dialect of the Smurf language, making it pretty much impossible for anybody to find out what had happened to their village. "Our village has been smurfed by a smurf who smurfs smurf." throughout the story leads to all kinds of speculation to what he might have meant to say. So it was only until they reached the village that they found out that it meant "Our village has been demolished by a dragon that breathes fire."
- Homnibus' servant, named Oliver, appeared in the original comic version of the story. Due to budget restraints by the NBC executives, he was removed when the story was adapted.