Set in the Qing Dynasty during the 43rd year (1779) of the reign of the Qianlong Emperor, martial arts master Li Mu Bai is about to retire and enter a life of meditation, though he quietly longs to avenge the death of his master, who was killed by Jade Fox. He gives his sword, a fabled 400-year-old weapon known as Green Destiny, to his friend, fellow martial arts wizard and secret love Yu Shu Lien, so that she may deliver it to Sir Te. Upon arrival in Peking, Yu happens upon Jen, a vivacious, willful politician's daughter. That night, a mysterious masked thief swipes Green Destiny, with Yu in hot pursuit -- resulting in the first of several martial arts action set pieces during the film. Li arrives in Beijing and eventually discovers that Jen is not only the masked thief but is also in cahoots with the evil Jade. In spite of this, Li sees great talent in Jen as a fighter and offers to school her in the finer points of martial arts and selflessness, an offer that Jen promptly rebukes.

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