Following the defeat of the charismatic religious leader Batlin on Serpent Isle, the Guardian banishes the Avatar to a world that he has already conquered: Pagan. Ultima VIII has a much darker tone and a very different premise, in comparison to most of the Ultima games. The world of Pagan is entirely different from that of Britannia: the Virtues are not part of Pagan's culture, and the magic systems and monsters are entirely different.

The world of Pagan is in eternal twilight as the result of an ancient battle between the Elemental Titans and the evil "Destroyer", which resulted in the victory of the Titans. However, the people of Pagan had to pay a high price: the Titans had to henceforth be worshiped as gods. The Titans bestow powers on their most ardent followers, but they are otherwise cruel and unloving rulers, and their followers terrorize the general population.