Plot
In the 500 years that have passed since the events of the previous film, the fox demon Xiaowei has been imprisoned in ice for violating the demon code. Que'er, a quirky bird demon, rescues Xiaowei, and the two leave in search of a man who is willing to give his heart to Xiaowei so that she may become human. They first encounter a boorish prince who scoffs at the suggestion, so they take his heart. Xiaowei uses her magical powers to bait another potential donor, a general who dons a gold mask that covers half of his face. Curious about the general's identity, Xiaowei incapacitates him, but discovers later that her rescuer is not a man, but a woman with half of her face disfigured.
Xiaowei accompanies the mysterious woman to the White City at the border, where the woman is revealed to be Princess Jing, the youngest daughter of the ruling family who is inspecting the military outpost led by General Huo Xin. Huo once served as Jing's lead bodyguard and they developed a deep mutual affection. However, Huo remained faithful to his profession and spurned the princess' confessions to him. Princess Jing's face was disfigured by a monstrous bear while she was out in the forest. Huo showed up too late but still managed to kill the bear and save her.
That evening, while performing for Jing, Huo and his men, Xiaowei malevolently enchants the general. Unaware of Xiaowei's bewitchment and feeling betrayed by Huo, Jing throws herself into a lake, but Xiaowei rescues her. Revealing her magical powers to Jing, Xiaowei suggests that the princess's disfigurement will prevent Huo from ever loving her; to prove his devotion, the two women use a magic potion to switch appearances.
Meanwhile, Que'er, while walking through the White City at night, is accosted by two hooligans. Pang Lang, a town dweller who claims to have descended from a family of demon hunters, intervenes, but not before Que'er rips out the heart of one of her tormentors, revealing herself as a demon. Pang Lang tries to warn Huo about the demons but is prevented from entering Huo's residence by his guards.
That night, Jing, in disguise as Xiaowei, seduces the enchanted Huo. The next day, exploiting Jing's desire for Huo's seemingly unrequited love, Xiaowei suggests she and Jing exchange appearances permanently. Huo enters and, in a final attempt to reclaim his affection, Jing exposes Xiaowei as a demon and orders Huo to kill her. The enchantment prevents Huo from following the order, so Jing attacks him in frustration.
Suddenly, the army of the neighbouring Tianlang kingdom, led by an evil witch doctor, arrives at the White City to seize Princess Jing, who has been betrothed to the Tianlang prince. Jing refuses to accept the marriage, forcing Huo to protect the city. Jing ends the fighting by threatening to take her own life, and the Tianlang forces agree to retreat if Jing gives herself up in three days. Unwilling to marry a man other than Huo, Jing offers up her heart to Xiaowei so that the two may switch bodies and thus their destinies.
Xiaowei, in disguise as Jing, arrives at the Tianlang camp and discovers that her fiancé is the boorish prince whose heart she earlier consumed and that the Tianlang plan to reinvigorate him with her heart, which is actually Jing's. Without her demon magic, Xiaowei realises she can not stop this plan.
Que'er reveals to Pang Lang that Xiaowei and Jing have switched identities, and the demon hunter disseminates the information to Huo. Just as Jing is about to consume her first heart, completing her transition into a demon, Huo intervenes. He blinds himself with his sword, demonstrating his commitment to Jing and breaking the power of Xiaowei's enchantment. Que'er, Jing and Huo then rush to the Tianlang camp to reclaim Jing's heart. The four defeat the Tianlang forces, but Que'er is killed in the battle. Huo offers his own heart to Xiaowei in exchange for Jing's, but Xiaowei decides to return Jing's heart unconditionally. Under the bewitching moment of a parting eclipse, Xiaowei's soul merges with Jing's body and Jing's face is healed in the process. The film concludes with Huo and Jing preparing to live happily ever after, while Pang Lang finds a bird resembling Que'er in her true form and obtains a feather similar to the one he got from her when they first met.
