Zhan Zhao is a court officer who learns of a plot to assassinate Judge Bao. While on holiday he meets a young man named Bai who turns out to be a woman. Zhan Zhao tries to recruit Bai to help him stop the assassination of Judge Bao.

Warriors of Virtue: The Return to Tao (set a few years after the original film) sees a new villain, Dogon, seize control of Tao, a parallel universe forming the film's major setting. On Earth, 12–year–old Ryan and his friend Chucky arrive at a martial arts competition in Beijing, whereupon they are unexpectedly taken to Tao. There, it is shown that they are to become Warriors of Virtue.

In a remote corner of the mountain wilderness, there is a small inn called The Margin of the World Inn strangely located in the hub of traffic. There are many haunted rumors flying around about ghosts, love, martial arts and intrigue.