Guo Jing and Huang Rong return to Peach Blossom Island and are shocked to see that Guo's first martial arts teachers, the "Seven Freaks of Jiangnan", have all been murdered except for Ke Zhen'e. Guo Jing is tricked into believing that Huang Rong's father, Huang Yaoshi, is responsible for the murders and he attempts to avenge his teachers by fighting Huang Yaoshi. The intelligent Huang Rong eventually uncovers the truth and reveals that the murders are actually part of a plot masterminded by Ouyang Feng and Yang Kang. Ouyang and Yang want to make Guo Jing and Huang Yaoshi kill each other and Yang can learn Ouyang's newly mastered skills from the fake copy of the Nine Yin Manual.

Our hero Kuo Tsing is winning the hand of fair maiden Huang Yung. However, almost immediately, clan rivalries in the "Martial Art World" lead to Kuo being wounded by Ouyang Feng and Huang being named the new leader of the Beggar Clan. All this is mounted with sparkling energy by three kung-fu choreographers and a star-packed cast.

Guo Jing and Huang Rong pursue Yang Kang to Iron Palm Peak, where Qiu Qianren and the Iron Palm Sect is based. Huang is injured by Qiu in a fight and she escapes with Guo Jing's help. Guo brings her in search of a cure to heal her wounds and they stumble upon a house in a swamp, inhabited by a woman called Yinggu. Yinggu tells them that the only person who can save Huang Rong's life is Duan Zhixing, the former ruler of the Kingdom of Dali, who has become a monk now.

Seeking to improve his combat skills, a young man falls in love with a woman with mystical powers but his past stands in the way of their union.

Guo Jing and Yang Kang are the sons of two rebels. The rebels are killed by imperial soldiers and the boys are rescued by six pugilists later. The pugilists agree to separate the two boys, tutor them separately in martial arts, and let them meet again when they have grown up, to determine whose abilities are better. Guo becomes the student of the "Seven Freaks of Jiangnan" while Yang Kang becomes the foster son of a Jurchen prince inadvertently.