Shrek, a green ogre who loves the solitude in his swamp, finds his life interrupted when countless fairytale characters are exiled there by order of the fairytale-hating Lord Farquaad of Duloc. Shrek tells them that he will go ask Farquaad to send them back. He brings along a talking Donkey, who is the only fairytale creature who knows the way to Duloc.
Meanwhile, Farquaad tortures the Gingerbread Man into giving the location of the remaining fairytale creatures until his guards rush in with something he has been searching for: the Magic Mirror. He asks The Mirror if his kingdom is the fairest of them all but is told that he is not even a king. To be a king he must marry a princess and is given three options, from which he chooses Princess Fiona, who is locked in a castle tower guarded by lava and a dragon. The Mirror tries to mention “the little thing that happens at night” but is unsuccessful.
Shrek and Donkey arrive at Farquaad’s palace in Duloc, where they end up in a tournament. The winner gets the “privilege” of rescuing Fiona so that Farquaad may marry her. Shrek and Donkey easily defeat the other knights in wrestling-match fashion, and Farquaad accepts his offer to move the fairytale creatures from his swamp if Shrek rescues Fiona.
Shrek and Donkey travel to the castle and split up to find Fiona. Donkey encounters the dragon and sweet-talks the beast before learning that it is female. Dragon takes a liking to him and carries him to her chambers. Shrek finds Fiona, who is appalled at his lack of romanticism. As they leave, Shrek saves Donkey, caught in Dragon’s tender clutches, and forces her to chase them out of the castle. At first, Fiona is thrilled to be rescued but is quickly disappointed when Shrek reveals he is an ogre.