Unwilling to work with his corrupt colleagues, upright official Zhang Yu resigns his post and returns to his hometown. One day, while boating on the Furong Lake, he plays the flute to vent his emotions. His music attracts Qiongzhi, the eldest daughter of the dragon king of the East Sea, who harmonizes with Yu’s melody. The two fall in love, but Qiongzhi’s fiance, Crown Prince East Dragon, vows to keep them apart.
Learning of his son’s resignation, Zhang’s father comes from the northeast to get an explanation. The son frankly admits that he wants to abandon his official career and marry the fairy princess. Enraged, his father knocks him down with a mace. His old servant takes the son to the dragon palace in hopes that the princess will find him a miraculous cure.
In the dragon palace, fairies are celebrating the dragon king’s birthday. The Dragon Princess insists on being with Zhang even though she has to sacrifice her immortality by destroying her three golden scales. The dragon king ties her up and prevents the old servant from procuring the cure. When he wakes up,Zhang is astonished to learn that Qiongzhi has been made to marry the crown prince. He tries to disrupt the marriage procession. The lovers decide to die in each other’s arms. Finally, the crown prince allows them to commit suicide. Their love moves heaven so much that their blood turns into flames, boiling the East Sea dry.