- "Give me the Dagger!"
- —Vizier to Prince
- "More than a weapon, the Dagger of Time is the only container besides the Hourglass that is strong enough to hold the Sands of Time. Whoever wields the Dagger is granted the power to control Time, by using up the Sands within."
- —Instructional Manual
- Main article: Time Powers#The Sands of Time
The Dagger of Time enables the wielder to reverse, stop, slow, and use various other time-related powers. Defensively, it, like the Medallion of Time and Staff of Time, protects its wielder from the effects of the Sands of Time. Doubling as a weapon, the Dagger of Time is the only weapon that can harm and recapture Sand Creatures.
The biggest consequence to using the Dagger of Time is the very manipulation of time itself. Unlike those without an artifact or using other artifacts, the wielder of the Dagger of Time remembers the original and altered timeline of their world once the Dagger of Time is used. 
Even when they are not in possession of the Dagger of Time, they visibly realize when someone else is using the powers of the Dagger. As a result of tampering with the natural order of time, those who release the Sands of Time and use the Dagger of Time may be visited by the Dahaka, a guardian of the timeline meant to safeguard the intended order of time.
According to the Vizier, Dagger of Time and many of the other artifacts accompanying came from the Island of Time. It is largely assumed that all artifacts of time were created by Kaileena. The Dagger's reason for being is never revealed. Prior to the events of The Sands of Time, it and the Hourglass of Time were taken from the Island of Time by the Maharajah and his Vizier. A "spoil of war", the Dagger was placed on an altar in the heart of his treasure vault.
The Sands of Time
The Maharajah's Vizier betrayed him to the Persians in order to claim the Dagger and Hourglass for himself. However, the Prince was the first to enter the treasure vault and claimed the Dagger for his own. The Vizier could do nothing, as Sharaman refused to take his son's prize. When Persians presented the Sands to the Sultan of Azad, the Vizier manipulated the Prince into releasing the Sands, preying on his sense of pride.
When the Sands are released, the Dagger protects the Prince from being transformed into a Sand Creature. He later used the dagger to trigger the "Grand Rewind" and return the Sands to the Hourglass. Time was reversed to the point before his father's army attacked India, but he maintained possession of the Dagger regardless. He returned the Dagger to the Maharajah's daughter, Princess Farah and asked her to "guard it well".
Prior to the Prince's tampering with time, the Dagger was presumably still in the safekeeping of Farah in India. When he travels into the past prior to the events that led to the Dagger's discovery by the Maharajah, the Dagger may have been locked away somewhere on the Island where it would be found by the Maharajah later.
The Two Thrones
Because of the Prince's efforts on the Island of Time, the Vizier was never killed. Motivated by dreams he "received" from the Dagger, the Vizier kills the Maharajah and steals the Dagger for his own. After conquering India and Babylon, he then killed Kaileena with the Dagger. Recreating the Sands of Time, he absorbs them into the dagger and stabs himself with the Dagger. Through its power, the Vizier became immortal.
The Prince reclaims the discarded Dagger and uses it to defeat the transformed Vizier, stabbing him in the chest. With the Vizier dead, he returns the Dagger back to the spirit of Kaileena. She departs from their world with Dagger to prevent anyone else from using its powers.
- According to the instructional manual for the The Sands of Time, only people carrying Artifacts of Time are able to avoid being transformed into Sand Creatures.
- The Dagger's length is increased in The Two Thrones and its capacity decreased.
- The Two Thrones the Dagger "easily pierces sand monster`s skin and armor".
The Sands of Time
The Two Thrones