Li Mu Bai a legendary swordsmen decides to retire from the world of martial arts. He pays a visit Yui Hsui Lien an old friend, he asks her to take his sword known as Green Destiny to Mr. Tse a family friend. Hsui Lien convinces Mu Bai to meet her in Peking at Mr. Tse's home. A few days when Mu Bai arrives in Peking he learns the Green Destiny has been stolen and discovers a rumor that Jade Fox (who murdered his master) might be hiding out in the city. Mu Bai tries to find both his swords and Jade Fox but uncovers a lot more is going on.