During the Song dynasty in Hangzhou, Ryô Ikebe portrays Xu Xian, an apprentice at his brother's medicine shop, who crosses paths with Yoshiko Yamaguchi as Bai-niang, a mysterious woman, and her companion Kaoru Yachigusa as Xiao-qing while they ride a ferry in the rain. A chance encounter unfolds when Xu Xian lends them his parasol, and the next day he goes to the Bai manor to return it. Bai-niang, touched by the gesture, gifts Xu Xian a red scarf and 500 pieces of silver, though Xiao-qing has secretly stolen the money from the local treasury on her mistress's orders. When the theft is discovered, Xu Xian's family and the local officials confront him at the abandoned Bai manor, and Bai-niang vanishes in a plume of smoke.
Xu Xian is sent to Suzhou to work under Wang Ming, an innkeeper and moneylender. Bai-niang and Xiao-qing reappear as guests, and Xu Xian rekindles a romance with his former mistress, entering a new relationship that stirs tension around the arrangements of Wang Ming. Wang Ming tries to press Bai-niang for his own gain, but Xiao-qing steps in to shield her mistress from exploitation. A Taoist monk from Mount Ji arrives, believing Xu Xian is bewitched and offering talismans to protect him. Bai-niang urges Xiao-qing to poison the local waters so Xu Xian’s family can sell medicine to treat the illness, prioritizing Xu Xian’s happiness over moral concerns.
When the monk attempts to enforce the talismans, Bai-niang reverses their power, leaving him paralyzed. The Xian family scrambles to repay Wang Ming by selling medicine, and Bai-niang demonstrates her growing magical prowess by trapping the monk atop a temple steeple. Wang Ming invites Xu Xian and the two women to his manor to celebrate, intending to use Bai-niang for his own ends with a poisonous Realgar wine. During the revelry, Xiao-qing accidentally spills the wine on herself and transforms into a green snake, and Bai-niang is forced to drink as well, soon revealing her true form as a white snake. Xu Xian dies of fright, but Bai-niang pleads with Heaven for a magical herb to revive him. Although the Bodhisattva initially denies the request, Bai-niang relinquishes her power for Xu Xian’s sake, and he awakens while the monk takes credit for the revival. Xiao-qing, not wanting to be exposed, tries to reveal the truth, and Xu Xian, feeling betrayed, curses Bai-niang as the trio heads toward the Gold Mountain temple.
At the temple, Bai-niang and Xiao-qing showcase their power by summoning a flood, compelling the high monk to acknowledge the White Lady’s magical abilities. Bai-niang halts the spell to rescue Xu Xian, which infuriates Xiao-qing and drives her to abandon her mistress at the lake’s edge. On the road home, Xu Xian experiences visions of Bai-niang and the white snake. Confronted by the temple’s high monk, he comes to understand his deep love for her and accepts her true nature. Choosing love over fear, Xu Xian decides to follow Bai-niang into Heaven. In the end, Xu Xian and Bai-niang die together and ascend to Heaven, united in their enduring love.
