Kang Chi and Yeo Wool enjoy the lantern festival. However, when a disciple is found dead with his liver eaten, Kang Chi falls under deeper suspicion. Tae Seo returns to the inn and tells Jo Gwan Woong about Yi Sun Shin's plan to build a new 'ironclad' ship.
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Tormented by the shattered fragments of the sacred jar of King Taejo, Gwanghae seeks out Son Haengsu. Recognizing him, Hwa-ryeong urges Gwanghae to meet Jeongi, and he is stunned to learn that she is Euldam's daughter. When Jeongi falls from her horse and lands in Gwanghae's arms, she panics and struggles in surprise—only for them both to tumble to the ground.
Leaving the collapsed Gwanghae behind, Jeongi escapes home with Taedo's help. While hiding at a tavern, Jeongi overhears a conversation between King Seonjo and Euldam, only to be startled when her eyes meet Gwanghae's. King Seonjo orders Euldam to create ritual vessels to be used for the Jongmyo ancestral rites.
During the competition for the Bunwon nangcheong position, Gangcheon comes face to face with Euldam and is unable to contain his anger. Meanwhile, Royal Noble Consort Inbin, the King's favored consort, devises a scheme in preparation for any possible outcome. At last, King Seonjo examines the porcelain made by Euldam and Gangcheon and reaches a careful decision. After meeting with Gangcheon, Yeonok is seized by severe labor pains…
While trying to save Kang Chi, Yeo Wool is shot by Seo-bwagwan. Yi Sun Shin arrests Jo Gwan Woong for leaking military secrets. As Yeo Wool dies from the gunshot, Kang Chi promises they will meet again.
Afraid of losing Yeo Wool, Kang Chi breaks up with her. She holds onto him, saying that losing him is what she fears most. Upset by the breakup, Yeo Wool goes out to clear her head and is attacked by a mysterious figure.
Kang Chi visits Monk So Jung, saying he wants to find the Gu Family Book so he can grow old with Yeo Wool. So Jung reveals their fate: one of them must die. Kang Chi is shocked. Meanwhile, Tae Seo is captured and taken to Jo Gwan Woong.
Gu Wol Ryung, unable to remember his past, attacks Kang Chi. Ja Hong Myung is tormented as she watches the fight between her half-beast son and the divine beast Wol Ryung. Later, Ja Hong Myung takes refuge at the school and meets Yi Sun Shin.
Yeo Wool encounters Gu Wol Ryung in the forest and is terrified. Wol Ryung tells her that Dam Pyung Joon is the one who killed Kang Chi's father. Rumors spread that Kang Chi is the son of a gumiho. Jo Gwan Woong declares that Kang Chi is responsible for the murders in the forest.
Kang Chi and Yeo Wool enjoy the lantern festival. However, when a disciple is found dead with his liver eaten, Kang Chi falls under deeper suspicion. Tae Seo returns to the inn and tells Jo Gwan Woong about Yi Sun Shin's plan to build a new 'ironclad' ship.
Yeo Wool is put in charge of Kang Chi's discipline at the school. Despite their bickering, they grow closer and go to see the lantern festival. Meanwhile, unusual corpses are found in the forest, and the school's disciples begin to suspect Kang Chi.
To save Chung Jo, Tae Seo reveals Kang Chi's location to Jo Gwan Woong. Tae Seo attempts to behead Kang Chi himself and cuts off his prayer bead bracelet. Kang Chi transforms into his beast form in front of Tae Seo and Chung Jo. Seo-bwagwan, sensing Kang Chi is Wol Ryung and Seo Hwa's son, reports this to Jo Gwan Woong.
Kang Chi is asked by Tae Seo to rescue Chung Jo. He worries about how Chung Jo will react to his half-beast nature. Yeo Wool comforts him, saying he is still Choi Kang Chi, regardless of his appearance. Meanwhile, the Hundred Year Inn staff hear that Chung Jo is to spend the night with Jo Gwan Woong.
Kang Chi and Yeo Wool are trapped in the room where the silver chest is hidden. Seo-bwagwan grows suspicious of the wall hidden behind a scroll. Meanwhile, seeing Yeo Wool's scar, Kang Chi remembers his childhood encounter with her.
Kang Chi and Yeo Wool are attacked by dark shadows. Kang Chi, unfamiliar with such opponents, is cut multiple times while fighting back. Hearing Kang Chi is injured, Chung Jo visits him out of worry, and they share an affectionate hug. Yeo Wool witnesses their embrace.
Jo Gwan Woong visits the Hundred Year Inn. Tae Seo politely informs him there are no empty rooms, but Gwan Woong becomes enraged and causes a scene. Kang Chi, who had been kicked out by Lady Yoon, hears the news and, after some conflict, returns to confront Jo Gwan Woong.
Following Buddhist Monk So Jung's advice, Park Mu Sol adopts and raises Kang Chi. Afterward, he succeeds in all his endeavors, building the Hundred Year Inn, the best in the south. Now an adult, Kang Chi causes trouble while trying to stop the marriage of his first love, Chung Jo.
Having given his heart to Seo Hwa, Gu Wol Ryung wishes to give up his immortal life to become human. He seeks to obtain the Gu Family Book by observing three taboos. Wol Ryung and Seo Hwa hold their own wedding and spend happy days in the Moonlight Garden, but Jo Gwan Woong remains relentless in his search for the missing Seo Hwa.
In the Moonlight Garden, rumored to be home to ancient mountain spirits, the guardian god of Jiri Mountain, Gu Wol Ryung, roams the human world. When Yoon Cham-pan is falsely accused of treason and executed, his daughter, Seo Hwa, is sold off as a gisaeng.
Jini dances the same dance again in the market, but is flustered when she is completely ignored.
Byeok Gyesu's attempt to take Jini as his concubine fails. Infuriated, he orders the dancers to stop dancing and start pouring him some liquor. However, Baekmu argues that the dancers have to finish their dance.
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