Two centuries ago, the great dog-demon Tōga denied his elder son Sesshomaru's request for ownership of two legendary blades, Tessaiga and So'unga. Afterward, Tōga travels to a mansion guarded by samurai, where his human wife, Lady Izayoi, is giving birth. The mansion is attacked by the army’s leader, Takemaru of Setsuna, who is secretly in love with Izayoi and arranges a brutal attempt on her life by stabbing her and setting the mansion ablaze. Tōga defeats the assailants, wounds Takemaru, and enters the burning halls. He uses his third sword, Tenseiga, to revive Izayoi, then allows her to flee with their newborn, whom he names Inuyasha. He faces Takemaru again, but as Izayoi watches from a safe distance, the mansion collapses on both men, and Tōga’s spirit urges Izayoi to live a long life with Inuyasha.
In the present day, Inuyasha travels through the Bone-Eater’s Well from the Feudal era to reunite with Kagome Higurashi in the modern world. Unbeknownst to them, Kagome’s family uncovers an ancient sword whose true identity is So’unga. The sword’s sheath-conscience, Saya, emerges before the weapon finds its way to Inuyasha and Kagome. Saya warns that Inuyasha must master the sword before it can threaten the world, but once he grips it, So’unga possesses his arm and drags him back into the Feudal era, forcing him to confront his own demonic nature.
Desperate to stop him, Inuyasha’s friends—monk Miroku, demon slayer Sango, fox demon Shippo, and Sango’s nekomata companion Kirara—attempt to restrain him, only to retreat when Inuyasha unleashes the sword’s Dragon Twister attack. Kagome carries Saya with her into the Feudal era and reunites with everyone, including Myōga, the wise elder who knows Saya’s history. They are soon joined by the legendary blacksmith [Tōtōsai], the creator of Tōga’s blades, who provides crucial context about the danger now facing them.
The action intensifies when Inuyasha unexpectedly encounters his older brother, Sesshomaru, who confronts him over the possession of So’unga. So’unga orders Inuyasha to attack Sesshomaru’s company, Jaken and Rin, until Kagome intervenes. She uses the Beads of Subjugation to break So’unga’s hold, freeing Inuyasha and sending the weapon fleeing. Sesshomaru departs with Jaken and Rin, while Inuyasha leaves an unconscious Kagome in their care, vowing to defeat So’unga himself.
As the plot unfolds, Tōga’s spirit returns, revealing that So’unga is inhabited by an ancient evil demon. Takemaru retrieves Sesshomaru’s severed arm from the past and is reborn with So’unga into a new body, swearing vengeance on Tōga by killing his sons. Takemaru seizes a nearby castle, crushes its army, and reanimates the fallen soldiers into an undead legion, even opening a portal to the netherworld.
Kagome and her friends join Inuyasha and Sesshomaru in the ensuing battle against Takemaru’s undead army. Miroku uses his Wind Tunnel to wipe out the remainder, while Kagome learns from Totosai (the blade-smith) that the only way to stop both Takemaru and So’unga is to fuse the powers of Tessaiga’s Backlash Wave with Sesshomaru’s Dragon Strike. Initially, Inuyasha resists the idea of fighting alongside his brother, insisting that they could never stand together, but necessity forces the brothers to combine their powers. The duo succeeds in destroying So’unga’s body and hurling the sword into the netherworld, and Tōga appears in spirit, expressing pride in his sons as the portal closes. Sesshomaru departs with Jaken and Rin, leaving Inuyasha and his friends to survey a world gradually returning to normal.
