The young Chor Lau-heung learns martial arts from Tuk-ku Kau-pai and has attained a high level of skill. His teacher sends him to Shaolin Monastery to attend a contest that is held once every ten years. On the journey, Chor meets Wu Tit-fa and Chung-yuen Yat-dim-hung. When Chor arrives at Shaolin, he fights with a Shaolin student called Mo-fa but neither of them is able to defeat each other. They decide to have a match again on another day. One night, Chor meets Mo-fa and strike up a conversation with her. Both of them decide to enter the palace in search of adventure. They disturb the prince on his wedding night but are accidentally caught in a trap and only manage to escape with the help of Chor's friends.
Meanwhile, Bat Prince breaks into Shaolin and kills Mo-fa's teacher, Tuk-ku Kau-pai and the Demonic Cult's leader. Bat Prince is actually the son of a Japanese ninja called Tin-fung Sap-say-long, and he wants to avenge his father. 17 years ago, his father came to challenge the three best fighters in China, but was defeated and committed suicide in shame. Bat Prince is not satisfied even after his victory and wants to dominate the Chinese martial arts world. Chor is injured by Bat Prince in a fight and loses his powers. Mo-fa brings him to the Holy Water Palace for treatment. Sui-mo Yam-kei heals Chor's wounds and teaches him new skills. Chor faces the Bat Prince in an epic battle.
Mei Ah Entertainment released a dual-subtitle DVD that they have since taken out of print. Xenon Pictures handled the U.S. release which basically contains the Mei Ah version with the only difference that the entire opening sequence was replaced with a card reading simply "Liquid Sword." The original burned-in subtitles are used.
The full uncut print runs 12 minutes longer than the Mei Ah (Hong Kong) and Xenon (U.S.) releases and was released in Taiwan on video by ERA Home Video.