Unlit Dragon fire arrows are used during the Underground Pass quest. They are created by using a damp cloth on regular dragon arrows. The arrows can be lit by using them on a fire to create lit dragon fire arrows. The lit fire arrows can pierce the rope in the Underground Pass Dungeon to lower the bridge. This is necessary to complete the quest. Any type of fire arrow will have the same effect in the quest, so it is recommended to use a cheaper arrow, such as a bronze fire arrow.
Dragon fire arrows have the same Ranged Strength bonus as regular dragon arrows, and the fire provides no additional benefit.