The Blue Dragon is a character appearing in Shrek Extra Large.
The Blue Dragon was a creature who took over the Crown Prince's summer castle. In order to keep the castle to himself, he stole the only key. While laying on one of the towers, he looked down at the knights fighting against the baby dragons, which caused him to get annoyed. Even worse, the drained moat caused the fish to twitch. There was no way he could possibly get peace and quiet.
When Shrek came to put an end to his disturbance, he lured him away with fire, causing the dragon to drop the key. After Shrek enters the castle, he quickly leaves after finding out the ruckus inside was just the dancing cow. The Blue Dragon tells Shrek that he has Merlin's crystal ball, and gives it to him along with a dragon's apple, which would grant him the ability to breathe dragon's breathe.