Kisan is shocked to hear ghosts are killing palace staff Lee Rin and Do Ha vow to stop them. Do Ha sees her sister Yeon Ha's face superimposed on Mo Yeon Wol, preventing her from being harmed.
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The Hwarang's performance faces an extreme crisis while Master Hwikyung visits Master Ahnji and tells him something meaningful about Queen Jiso. Meanwhile Seonu and Sam Maekjong finds out that Aro has disappeared and they set off to find her and Sam Maekjong locks horns with his mother, Queen Jiso.
Hwarang has practiced a lot for their performance, and everyone is expecting to watch it at the festival. However, Master Youngshil orders Banryu to ruin the performance so that the people see how unprepared and incompetent the Queen's Hwarang is. Banryu hates that he must follow the order when he wants to make it successful with other members.
Hwarang's second assignment is to give a music performance at the Thanksgiving Festival. Wooreuk, the master of instruments, visits Hwarang House as an instructor. The members practice day and night to show the amazing performance to the people and the Queen. Meanwhile, Aro goes to talk to Wooreuk after finding out that he raised her brother.
Master Wehwa gives out the first assignment to the Hwarang members. It is to discuss a king as water and it must be based on “Tao Te Ching” by Laozi. Though his answer is enough to convince everyone, Seonu fails to pass because he argues that Taoism is garbage. He now has only two more chances left to survive in Hwarang.
They begin their training as members of Hwarang, but some of them are annoyed by a half-breed, Seonu, for being in the same group. Especially, Banryu is disgusted that he insults Seonu in every way. He tries to hold in, but starts the fight at last when Banryu talks bad about Aro.
The selected young masters are invited to attend the appointment ceremony of Hwarang. Queen Jiso feels shocked and betrayed to see her son, Sam Maekjong at the ceremony because she has worked so hard to protect him until now and his appearance is against her will. However, the King has decided to introduce himself to the world through joining Hwarang.
Lee Rin confronts Park Soo Jong, who holds the royal seal. As soldiers attack Lee Rin, Sadam appears, threatening to kill the Queen Dowager unless Lee Rin hands over the seal.
Park Soo Jong threatens the Queen Dowager for the royal seal, warning of a bloodbath. Meanwhile, Lee Rin discovers the seal's location using a jade ring given to him by the Queen Dowager.
Park Soo Jong orders Lee Rin to be bound. As he's dragged away, Lee Rin shouts that the rebellion is reckless. The Queen Dowager warns Park that he will never get the royal seal if he harms Prince Wolgang (Lee Rin).
Park Soo Jong leads his troops to the palace, declaring he will take over as regent to fix the state's affairs. Meanwhile, Sadam is enraged to find that Do Ha, who was trapped inside a painting, has disappeared.
Kisan is shocked to hear ghosts are killing palace staff Lee Rin and Do Ha vow to stop them. Do Ha sees her sister Yeon Ha's face superimposed on Mo Yeon Wol, preventing her from being harmed.
Jo Sang Heon cannot distinguish the real Do Ha from the fake one, as both bear the Night Watchman's mark and the magic reveals no ghostly energy. Meanwhile, Kisan orders tax hikes and more manpower to speed up the pagoda's construction.
Lee Rin asks Moo Seok to join him in fighting the smallpox goddess (Mamashin). Meanwhile, Soo Ryun is tortured.
Lee Rin informs Jo Sang Heon that Sadam is the one who gathered the vengeful spirits. Sang Heon then explains what happened to King Haejong. Park Soo Jong refuses to ally with the 'lowly shaman' Sadam and has him thrown out.
Lee Rin asks Jo Sang Heon what happened to his father, but Sang Heon coldly turns him away, saying it's none of his business. Meanwhile, Sadam and Hojo are pleased, believing vengeful spirits will heal the dragon god.
Lee Rin is worried about Do Ha's wound. Seeing Lee Rin and Do Ha together, Jo Sang Heon stops Lee Rin. Moo Seok is surprised to see Sang Heon take down five thugs at once.
While Ok Mae calls for Jo Sang Heon, Lee Rin slips into a room after a scuffle with Do Ha, narrowly missing Sang Heon. Moo Seok feels awkward as Do Ha applies medicine to his arm wound.
Kisan suspects Park Soo Jong of smuggling Lee Rin out. Enraged by news that Park moved troops, Kisan questions if Park is threatening him. Lee Rin and Do Ha hide in the underground storage of the Jamojeonga guesthouse.
Meteorites fall on Hanyang, breaking the palace's barrier and allowing ghosts (gwimul) to invade. They attack Prince Lee Rin, who falls mysteriously ill. King Haejong learns the only cure is the 'Millennium Flower' and departs for Mount Baekdu to find it.
Keutbong dies in Eopbok's arms. Eopbok is furious over the unknown man's betrayal and seeks revenge.
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