Ning Caichen is a timid tax collector whose job requires him to travel to rural areas. He arrives at a town but is forced to seek shelter in a deserted temple in the forest on the outskirts as the inns are fully occupied. That night in the temple, Ning meets a beautiful and alluring young maiden called Nie Xiaoqian and falls in love with her. However, when he later recalls last night's events the next day, he becomes increasingly fearful and superstitious. That night, he returns to the temple to spend his night there and confirms his theory that Nie is actually a spirit.
Nie tells him her story of how she became eternally bound to the servitude of a sinister Tree Demon. She explains that as long as her remains are buried at the foot of the tree, her spirit will be forever bound to the Tree Demon. Ning attempts to free her from her suffering. He seeks the help of a powerful Taoist priest and master swordsman called Yan Chixia, whom he met earlier. Yan battles the Tree Demon and attempts to free Nie's soul but fails. Nie's soul is taken to the Underworld for betraying her master.
Ning is unwilling to give up on Nie and insists that Yan helps him. Yan manages to open a temporary portal to the Underworld. Ning and Yan enter the Underworld and attempt to free Nie's soul from suffering once more. They are unable to find her in the midst of thousands of other spirits. Eventually, Ning and Nie are able to see each other briefly near dawn when sunlight shines on the urn containing Nie's cremated remains. Nie tells Ning that the only way to save her soul is to place her remains to rest at another more auspicious burial site before she returns to the darkness. Ning follows her instructions and with Yan's advice, Ning buries Nie's remains near the crest of a hill. He burns a joss stick for her and prays for her soul while Yan watches solemnly behind him.
- Leslie Cheung as Ning Caichen
- Joey Wong as Nie Xiaoqian
- Wu Ma as Yan Chixia
- Lau Siu-Ming as Tree Demon
- Hu Dawei
- Jiang Jin
- Lam Wai
- Elvis Tsui
- Wong Jing
- Xue Zhilun
The story was loosely based on a short story (聂小倩) in the Qing Dynasty literature Strange Stories from a Chinese Studio from writer Pu Songling. The film was immensely popular in Hong Kong and several Asian countries, including South Korea and Japan when released. Most notably it boosted the stardom of Joey Wong, won Leslie Cheung huge popularity in Japan, and sparked a trend of folklore ghost films in the HK film industry. The film grossed $18,831,638 HKD in Hong Kong.