After Farah seduces the Prince and steals the Dagger of Time and the Sword of the Avenging Warrior, he then finds this extremely powerful sword. The Prince finds it after waking up and finding Farah gone. It is on a pedestal and is guarded by a glowing aura that will harm the Prince if he touches it. The Prince will also pass several sand monsters which, luckily for him, ignore him until he arms himself with the blade. By solving a light and mirror puzzle the aura is lifted and the Prince can obtain the weapon.
This sword is a deadly weapon that will flat-out destroy any sand creature it touches, killing them even without the Dagger of Time (although for gameplay reasons this is because the Dagger is not in the Prince's possession while he wields the Sword of the Enlightened Warrior). The cost of such power is that for the brief time the Prince holds both the Sword and the Dagger, he cannot retrieve any sand unless a sand creature knocks down its ally.
The Sword of the Enlightened Warrior is lost when the Prince performs the Grand Rewind, unlike the Dagger of Time, which could be because he never had the sword before the events of the game, or it could because it is not a artifact made by the Empress of Time.