Emp. Chao Kuang-jen of Sing, killed by his brother Tai-tsiaig, seeks redress from Emp. Jade in Heaven. The latter delegates Lady Chih Lung (later Queen Mother Hsiao of Liao) to shake the Sing reign, but as the empire is not yet doomed, Ta Peng, Wen Chu-sheng and Tien Chi-sheng also come to earth to help it.

Pan Hung, whose daughter Feng is Flap. Tai-tsung's favorite concubine, runs roughshod over the people by dint of his royal kinship, while Yang Yeh's loyal family of 8 warriors win the imperial grace for worthy services rendered, much to his jealousy.

With royal permission, Pan Hung holds a tournament to decide on a Marshal to lead the Army against Liao, and then hurts the contestants by foul means, hoping to put his third son Pan Pao in command. Meanwhile, he provokes Yang Yeh to stop his sons from taking part in the duel.

With Pan Hung in command, Generals Yang badly defeats the Liao troops on the front. But trapped by Hung, the Generals are forced to return to rescue the besieged Tai-tsung. Yang No. 7 leads the Army to return, only to be barred by Hung. He kills the guards to break in. Finally, the Yangs' whole Army is trapped into a complete annihilation. As a result, Yang Yeh, stranded in a valley, is forced to commit suicide. No. 7 escapes to seek reinforcements and is killed by archers. No. 4 is captured, but wins the heart of Princess Ching Lien and marries her. No. 5 is rescued and becomes a monk.

The surviving No. 6 returns to the Capital to lay the case before the liege. Pan Hung is then captured, but aided by Lady Pan, he frames the Yangs for conspiracy. Luckily, an honest judge Kou Chun forces Pan Hung into confession and orders him to be exiled. He is subsequently killed by No. 6.

Learning that his mother is coming to the Liao border, No. 4 solicits an imperial decree from Princess Ching-lien to visit her. His wife is indignant over his marriage with a foreign princess, and Lady Yang stops him from returning to her.