Guo Jing and Huang Rong pursue Yang Kang to Iron Palm Peak, where Qiu Qianren and the Iron Palm Sect is based. Huang is injured by Qiu in a fight and she escapes with Guo Jing's help. Guo brings her in search of a cure to heal her wounds and they stumble upon a house in a swamp, inhabited by a woman called Yinggu. Yinggu tells them that the only person who can save Huang Rong's life is Duan Zhixing, the former ruler of the Kingdom of Dali, who has become a monk now.
Guo and Huang travel to find Duan Zhixing, but they must defeat Duan's four bodyguards in a battle of wits first. They manage to overcome the odds and eventually meet Duan Zhixing. Duan explains to them that Yinggu had directed them to him on purpose, because in order to save Huang Rong, Duan will need to use a special inner energy skill that may cost him his life if he uses it. Duan then proceeds to tell them a story of his past. Yinggu was actually Duan Zhixing's concubine when he was still the ruler of Dali, but Duan neglects her due to his obsession with martial arts and she has a secret affair with Zhou Botong. Yinggu becomes pregnant with Zhou's child later without Zhou knowing. The infant is mortally wounded by a masked man, who wants to force Duan Zhixing to use that special skill to save the infants's life. Duan refuses and the child dies. Yinggu hates Duan for that and she leaves him to lead a life in the swamp, while secretly plotting her revenge. Duan Zhixing tells Guo Jing and Huang Rong that he regrets his past decision and he decides to save Huang's life now, at the expense of his own.
While Duan is healing Huang, Yinggu infiltrates Duan's residence and almost kills him, but she changes her mind at the last moment. Duan does not blame her and allows her to leave again. Just then, Qiu Qianren and the Iron Palm Sect's members show up to challenge Duan Zhixing to a fight. Yinggu recognizes Qiu's martial arts technique and realizes that Qiu is actually the masked man who injured her child, and she joins in the fight. Not long later, Zhou Botong appears and Yinggu recognizes him. Zhou points out the weaknesses in Qiu Qianren's martial arts and eventually the protagonists defeat the Iron Palm Sect people. The film ends with Yinggu running after Zhou Botong.
