The film is set sometime in the late Qin dynasty or early Han dynasty. In the desert, General Wang Sheng and his men attack a Xiongnu camp, where Wang chances upon a maiden called "Xiaowei" and brings her home. Xiaowei is actually a fox spirit who feasts on human hearts to maintain her lovely and youthful appearance. Trouble brews when Xiaowei falls in love with Wang, who already has a wife, Peirong.
Another love triangle is also present, with the members being Wang Sheng, Peirong and Pang Yong. Pang Yong is a former general in the same army as Wang Sheng. He was in love with Peirong, but she married Wang Sheng eventually. A series of mysterious murders occur in the city and the victims have their hearts dug out. Peirong becomes suspicious of Xiaowei after a diviner told her that Xiaowei is actually a demon and after she accidentally cut Xiaowei but Xiaowei showed no sign of bleeding. Peirong approaches Pang Yong for help. In the meantime, Pang Yong meets Xia Bing, a young and inexperienced demon hunter, and befriends her. The murders were actually committed by Xiaoyi, a chameleon spirit who shows unrequited love towards Xiaowei and helps her obtain the human hearts she needs. Xiaoyi fought with Pang Yong and the soldiers on a few occasions and was nearly captured by Pang but he always managed to escape. At the same time, Pang Yong and Xia Bing come to Wang Sheng's house and accuse Xiaowei of being a demon, but Xiaowei succeeds in maintaining her disguise, much to the ire of Peirong and Xia Bing.
When Xiaowei gets closer to Wang Sheng, Xiaoyi turns jealous and attacks Wang, but is driven away. When Xiaoyi meets Xiaowei again later, she is so furious that she shouts at him to leave, despite him warning her that love between demons and humans is impossible and pleading her to allow him to remain by her side. One night, Peirong's suspicions about Xiaowei are confirmed when she chances upon Xiaowei peeling off her human skin right in front of her and revealing her true form. Peirong and Xiaowei come to an agreement: Xiaowei promises to stop killing people; in return, Peirong offers her place as Wang Sheng's rightful spouse to Xiaowei and takes the blame for the murders. Xiaowei gives Peirong a potion to drink, after which Peirong's hair turns white and her features become "demonic". The city's residents are horrified when they see Peirong and think that she is the demon. Just as Peirong is about to be killed by the citizens, Pang Yong and Xia Bing show up, save her, and bring her to a cave.
Pang Yong and Xia Bing deduce that Peirong has been poisoned by the demon and she is close to death because the lighter the colour of the poison, the more fatal it is. Peirong is gradually turning white. Not long later, Wang Sheng, his soldiers and members of his household (including Xiaowei) come to the cave. Wang Sheng swears to kill Peirong if she is really a demon and is responsible for all the murders, but also expresses his love for her at the same time. Peirong then impales herself with a dagger Wang is holding on to and dies in his arms. Xiaowei tries to gain Wang Sheng's affection by moving closer to him, but he takes no notice of her and continues to weep while holding on to his dead wife's body. At this point, Xiaowei realises that Wang Sheng will never truly love her.
Pang Yong shouts to everyone that Xiaowei is the real demon and then slashes her with his weapon to prove it, but her body is as hard as steel. Wang Sheng approaches Xiaowei and begs her to bring Peirong back to life. When Xiaowei asks him what she will get if she restores Peirong to life, Wang replies that he loves her but he already has Peirong, and then kills himself. The heartbroken Xiaowei screams and reveals her true demon form. She then willingly attempts to bring Wang back to life with her magic powers in the form of a small orb. However, before she can do so, she is interrupted by Xiaoyi, who snatches away the orb and reprimands her for sacrificing all the powers she cultivated over thousands of years to save a man's life. He swallows the orb and tells her he is going to bring her home. Pang Yong and Xia Bing fight with Xiaoyi and eventually slay him but he kills Pang in the process. Xiaowei retrieves the orb from Xiaoyi's body and another orb containing Xiaoyi's powers, and uses them to bring every dead person in the cave back to life.
Before the film ends, Xiaowei is shown manifested in her white fox form without her powers because she has already given them up to bring Peirong and Wang Sheng back to life.
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