Deprived of his rival, dying of an inevitable (but not debilitating) ailment, and possessed of a pill that can cure all wounds except his own sickness, Yen Shisan takes up the life of a gravedigger, trying to live a good life in the time he has left to him, while the evil kung fu group Divine Might decides to defeat the Supreme Sword Manor themselves and become the supreme force in the wulin (the world of Kung Fu), as, bereft of Shao-Feng, there is nobody there who can stand against them.

He intercedes when the lowest-status of the prostitutes, Hsiao Li (Jiang Mengjie), is being stiffed by her patrons and bonds with her, but leaves the brothel after he hears that the Big Boss wants to promote him to a bouncer, instead being taken in and working with poor, but happy, nightsoil collectors.

Yen Shisan spirits Shao-Feng away to save his life, but this proves disastrous for the village, which is burned to the ground and nearly all its inhabitants slaughtered by Chiu-Ti's warriors.

Supreme Sword Manor is attacked, and its forces slaughtered and driven back by the combined power of Chiu-Ti's warriors, now working with Divine Might's masked fighters, until Yen Shisan arrives just in time to prevent an honor-saving suicide, and Shao-Feng defeats the combined attackers easily, unmasking Divine Might's warriors as the branded rejects from Supreme Sword Manor, and in the ensuing conflict, Chiu-Ti accidentally stabs her chief servant (and rejected lover) fatally, and faced with one final rejection; he stabs her in the back, resulting in her dying in Shao-Feng's arms in one final marriage.

Shao-Feng swaps swords with the dead Yen Shisan at his gravesite, and in the penultimate scene, goes to his life as a wandering swordsman with his burn-scarred companion, Hsiao Li.

"I will save them," he says, and the final scene consists of vines falling in a forest to reveal the face of Goddess Kuan Yin, the Bodhisattva of Compassion.