The battle between Bankotsu and Inuyasha begins. Meanwhile, Sesshomatu comes to Mt. Hakurei. He is blocked by the holy barrier, and turns back. But there are demons within the holy ground.
There is a holy island in a lake surrounded by mist. Saint Hakushin, who become a living Buddha a hundred years ago, is venerated there. But something strange happens. The father of a boy named Shintaro goes to investigate, but he doesn't come back. I
Bankotsu gets Kagome and the others involved in his battle with Inuyasha. Inuyasha is angered that his friends are getting hurt, and corners Bankotsu. But Saint Hakushin's vajra protects Bankotsu and turns the Tessaiga back into a rusty sword.
Mt. Hakurei's holy barrier prevents demons from entering it. Saint Hakushin helped Naraku, and placed the barrier. Koga tries to find a way to beak through, but fails. Renkotsu and Ginkotsu show up to get Koga's Sacred Jewel shards.
Mt. Hakurei gets stronger, and Kikyo is prevented from going into its hold ground. Kikyo leaves Chiyo's village, but she goes after Bankotsu to see where fellow deceased, the Band of Seven, are doing. Jakotsu and Suikotsu attack Sesshomaru, and kidnap Rin
Suikotsu cannot kill Chiyo and the others. Jakotsu stops him. He senses an attack from Sesshomaru. Suikotsu and Jakotsu move within the holy realm, and wait for Sesshomaru. Sesshomaru's movements are slow because of the holy ground, but he skewers Suikotsu with his Tokijin, and slashes Jakotsu's chest with his claws.
Ginkotsu has died, and Renkotsu uses his shard without permission. In doing so, he has betrayed Bankotsu. He cannot go back anymore. He lusts for even more power and attacks Koga so that he can take the Sacred Jewel shards that he owns.
The evil within Mt. Hakurei is Naraku's demons and Kagura. Miroku risks his life to save Sango, by opening his Wind Tunnerl and sucking in the demons along with the poisonous bugs. But he uses up his power and collapses. Inuyasha is concerned about Miroku and Sango.
Miroku and Sango come face to face with the Saint Hakushin's mummy on Mt. Hakurei. The saint tells them his reason for helping Naraku. Miroku tells him that he doesn't blame him, but that he cannot allow the barrier to protect Naraku.
Inuyasha regains his demon powers. He defeats Jakotsu, and hurries to Mt. Hakurei. Renkotsu has rebellious feelings towards Bankotsu. He kills Jakotsu while he's injured and takes his shard. Meanwhile, Kikyo comes face to face with the mummy of Saint Hakushin.
Mt. Hakurei's barrier disappears. Inuyasha is worried about Kagome. Kagome heads to Mt. Hakurei with Koga and the others. Meanwhile, Kikyo and Sesshomaru have sensed that something strange has happened from different locations. As Mt. Hakurei rumbles, Inuyasha and Bankotsu begin to fight within the mountain.
Miroku and Sango see a mysterious lump of flesh in the depths of Mt. Hakurei.Sesshomaru and Kikyo sens the strange happening from different locations, and make heir way to Mt. Hakurei. Bankotsu is fighting one on one with Inuyasha.
While Inuyasha, Kagome, Songo, Miroku, Shippo and Kirara are trapped inside of Mt. Hakurei, they come to the realization that they are actually trapped inside of Naraku. As they watch Naraku create his new, more powerful body, they attempt to save themselves and Koga, who was engulfed into the walls of Naraku's body.
Mt. Hakurei is destroyed. Koga falls to the bottom of it. Inuyasha saves him. As he goes to meet up with Kagome and the others, who are trying to escape as quickly as possible, he sees an illusion of Kikyo.
Inuyasha is pulled away from his friends when he is tricked by fake information that Kikyo is still alive. Meanwhile, Kagome and the others are at a certain castle town. They are reproached and captured. Kagome is called to the castle, by herself.
Naraku's baby carries Kagome to an abandoned temple. He orders Kagura to place a corrupt Sacred Jewel shard in her. But the shard is deflected and Kagome regains consciousness. The baby tries to regain control of her soul once more by telling her to curse Inuyasha's bond with Kikyo.
In feudal Japan, Naraku has sent a demon called Mimisenri to look for the Sacred Jewel shards. Meanwhile, Kagome returns to the present day, and finds that the school is in the middle of preparing for the cultural festival. Kagome ends up helping out with the festival.
On the day of the cultural festival, the dried demons that Kagome brought from feudal Japan are revived. They devour the food that Yuka and the others made. Kagome covers up the emergency with food from the convenience store.
A demon named Chokyukai is revived, and begins to steal girls. A young man named Kisuke comes to Kaede for help. Inuyasha go to defeat the demon. When they arrive at Kisuke's village, Chokyukai appears leading a water imp and a monkey.
Five demon fox brothers believe Shippo to be a hero. They become his disciples to learn his special technique, the Wind Scar. Shippo is unable to teach it to them, but he tries to show off and fool them. He tricks Mizuki, a girl that he had become friends with recently, and makes her angry.
Inuyasha and the gang meet Shinosuke, who is looking for his fiancée. They are led to a village of only women, and are separated by sex into their rooms. Kagome is left together with Sango. She asks Sango about her relationship with Miroku.
Miroku knows the truth about the Salamander of the Marsh Demon and Kwannon Scrolls. Inuyasha defeats the demon, but the village women remain possessed. Miroku must exorcise them individually, and he is forced to face the possessed Sango last.
Sara, a mysterious woman, appears before Sara. Sara was once saved by Sesshomaru. She was reincarnated just as she had died from an illness. She has stolen Inuyasha's Tessaiga, and turned Miroku and Sango into glass statues.
Sara asks Sesshomaru to destroy her along with the spirit. Sesshomaru complies, and uses the Tessaiga to destroy Sara along with the spirit. Sara accepts her fate. Inuyasha and Kagome watch her final moments.
Priest Mushin, the person who raised Miroku, is going to die. Miroku and the others are shocked. They ask to Mushin's what he wants so that they can give him one last gift. He says that he will have no regrets if he gets to drink "Mist Sage" a wonderful sake that is brewed by the Sake Sage.
A treasure stealing invisible demon appears. An old lady who failed to defeat him asks Inuyasha and the gang for help. Inuyasha are in charge of guarding the second biggest mansion in town.
Akitoki, Hoji's ancestor is on a journey to offer the Hojo family heirloom, the Kenkon Naginata, a demon sword that brings disaster. Inuyasha and the gang travel accompany him. People who are after the Kenkon Naginata appear.
Hojo and Kagome are separated from the others and are trying to get back to them. Some of the demons find them and try to lead them to their leader, but Kagome is too smart for them. As they are trying to find Inuyasha and the others, Inuyasha meets the leader of the demons that seeks the sword and is unable to move due to a spell that was placed on him.