The film is set in the Qing Dynasty during Emperor Qianlong's reign. Li Mu Bai is an accomplished Wudang swordsman. Long ago, his master was murdered by Jade Fox, a woman who sought to learn Wudang skills. Mu Bai is also a good friend of Yu Shu Lien, a female warrior. Mu Bai and Shu Lien have developed feelings for each other, but have never acknowledged or acted on them. Mu Bai, intending to give up his warrior life, asks Shu Lien to transport his sword, also referred to as the Green Destiny, to the city of Beijing, as a gift for their friend Sir Te. At Sir Te's estate, Shu Lien meets Jen, the daughter of Governor Yu, a visiting Manchu aristocrat. Jen, destined for an arranged marriage and yearning for adventure, seems envious of Shu Lien's warrior lifestyle.