The film is set in 18th century Qing Dynasty China. Li Mu Bai is an accomplished Wudang Sect swordsman and Yu Shu Lien heads a private security company. Yu Shu Lien and Li Mu Bai have feelings for each other, but because Shu Lien had been engaged to Mu Bai's closest friend, Meng Sizhao, before his death, Shu Lien and Mu Bai feel bound by loyalty to Meng Sizhao and have not acted on their feelings for one another. Mu Bai, after choosing to retire, asks Shu Lien to give his sword "Green Destiny" to their benefactor Sir Te in Beijing. Long ago, Mu Bai's master was murdered by Jade Fox, a woman who sought to learn Wudang skills. While at Sir Te's place, Shu Lien makes the acquaintance of Jen Yu, who is the daughter of rich and powerful Governor Yu and is about to get married.