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Dr. Lugae's origins are mostly unknown in the game: He's known as a gifted scientist who the Emperor relies upon for the creation of arms and artillery for the sake of the Avalonian Empire. After briefly appearing in the prologue, his first true appearance is at the end of Chapter 2, where he speaks to his robotic creation, Argy. He intends to teach her about the science and mystery of the world (specifically, naming and memorizing the stars in the sky), before Cid arrives, claiming that Lugae is becoming far too attached to his work, and that Argy was designed to be used as a weapon, rather than as an avatar through which the doctor can live through after death. Cid, requiring Argy for use on the Heliogabalus, takes her away from Lugae, asserting that the doll is now under his command.
En route to Fabrica, where preparations will be made to integrate Argy into the Heliogabalus, Lugae pleads with Cid to give him a little more time with Argy, since he believes that she's unready to be used as a weapon. He defends his robot when Cid kicks her, and ends up getting knocked to the floor because of it, causing Argy to rage out of control and accidentally be blown off the ship. Once at the Heliogabalus, Cid speaks to Lugae, telling him that the Warriors of Light have found Argy, and are bringing her to Fabrica Cave. The doctor travels with him to the Engine Room of the warship to meet with his 'daughter', but is shocked to find that Argy has absolutely no memory of her former master. Cid uses his own technology to take control of Argy, then uses her to attack the team.
Argy manages to overcome Cid's influence when Sol and Sarah reach out to her, and Cid infers that Lugae must have made modifications of his own to the droid in the way of artificial intelligence. To Lugae's horror, Cid reveals that he has made a new prototype based on the doctor's research, labelled 'Argy-2'. He uses this creation to take out the original and her friends, but it is defeated in battle. Following this, Argy herself burns out, and in her final moments of consciousness comes to recognize her father. The Heliogabalus begins to explode (likely due to Cid's intervention), and Lugae, after seeing the compassion with which they treated his child, decides to help them escape.
Dr. Lugae finds a ship for the Warriors of Light to use at a dock in Fabrica Cave, and they leave the continent aboard it. Along the way to Berth, he tells the team why it is that he betrayed the Empire: After spending so many years pouring his heart and soul into Argy, he couldn't bare to hand her over to Avalon, who would have used her to kill thousands of people and enslave the world. When the boat reaches the port of Barth, Dr. Lugae suggests that the group moves on, as the Empire has probably sent out a platoon of soldiers to eliminate the ship and the doctor. He is, however, still present at the docks when Sol, Aigis and Dusk find that Sarah has gone missing, and he agrees to take him to the northern part of the continent, where the castle of Burtgang lies. Along the way, the ship is discovered by enemy forces, and Lugae urges the three to jump off the ship to escape danger, while he and Argy (whom he rescued from the Heliogabalus) deal with the Empire.
Lugae later rescues the party from Castle Burtgang by using the dilapidated boat, which he has since transformed into a working airship. He's with the party in Chapter 4 when the group is taken to Mysidia, and communicates with them via Whisperweed when they infiltrate the Heliogabalus to stop its bombardment of the floating city. After the Worlds of Light and Darkness merge to form the World of Dusk, Lugae travels the world with the Warriors of Light and Argy at Sophia's instruction to find remnants of life in the cities and towns, and to find out what happened to the planet after the dimensional shift.
Later on in the story when the unified eight warriors enter the World of Nil, Lugae and Argy communicate with them using the Whisperweed again. After the party defeats Elgo in the depths of the void, the doctor joins forces with Sophia and Barbara to combat the forces of Nil and restore peace to the land. In the ending sequence, after peace has been restored, Dr. Lugae and Argy take Diana and Sol to Burtgang, where Sarah is to be enthroned as Queen of Burtgang. He is present with Argy at the castle when Sarah is finally crowned as queen.