Ding-on is an orphaned blacksmith working in Sharp Foundry, run by his master, a friend of his deceased father. Ling, Sonny Song, the master's daughter, narrates the tale and is torn between Ding-on and his colleague Iron Head. One day, Ding-on and Iron Head witness a monk fending off a group of thugs, who are later ambushed and kill him in a ruthless act of revenge. Iron Head, furious, identifies himself as a Sharp Foundry man and taunts the thugs to fight him, an act that enrages the master. The master punishes Iron Head for his reckless bravado, and Iron Head grows resentful toward Ding-on for speaking up about the incident. He becomes even more hostile when the master reveals his intention to name Ding-on as his successor.
That night, Ding-on overhears Ling speaking with her grandmother and learns that his father died while saving Ling’s father from Flying Dragon, a notorious, heavily tattooed assassin. Fueled by a desire for vengeance, Ding-on takes his father’s broken sword—referred to as the Blade—and bids farewell to his master. Ling tries to catch up with him, but trouble arises as thugs close in on her. Ding-on hears Ling’s screams and returns to her side, fighting the assailants to protect her. In the clash, he loses his right arm and plummets off a cliff.
Ding-on is saved and cared for by a peasant named Blackie. Unable to continue his quest for revenge in his crippled state, he buries his father’s weapon and tries to rebuild a peaceful life beside Blackie. Ling and Iron Head set out to find him, while Ling grows increasingly disillusioned with life and people, especially after witnessing Iron Head exploit a prostitute whom he had once saved.
Meanwhile, Ding-on endures humiliation while working in a restaurant. He is filled with frustration when he glimpses Flying Dragon again and feels unable to pursue his long-denied revenge. One night, a band of bandits burns down his house, ties him up, and beats him mercilessly. Blackie discovers a martial arts manual hidden by her parents and passes it to Ding-on. With only his father’s broken sword and the imperfect techniques in the book, his initial attempts falter. Yet, driven by rage, he discovers a devastating spinning movement that lets him compensate for both his missing arm and his flawed weapon.
Ding-on defeats the bandits who burned his home and saves Ling from danger, though he does not reveal his identity to her. Meanwhile, Skeleton recruits Flying Dragon to help destroy Sharp Foundry and eradicate everyone there. A battle erupts between Flying Dragon and Sharp Foundry’s blacksmiths, and while his master struggles to hold the line, Ding-on returns just in time to defend him. He ultimately kills Flying Dragon after a prolonged and grueling duel. Skeleton and his men scatter, realizing their plan has collapsed. Ding-on then walks away from Sharp Foundry with Blackie. In the final scene, an aging Ling imagines herself embracing Ding-on and returning to the happier times of the past.
