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.
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Yoon offers Ji Young to be her 'sponsor', and Ji Young leaves in indignation and a sense of betrayal towards Hyung Joon. Teacher Jung tries to get money from Hyung Joon's mother but is flustered by her formidable demeanor. After many twists and turns, Ji Young steps onto the stage for the 'Mandarin Lady Pageant'.
Under Director Ma's guidance, Jae Hee undergoes special training to become Miss Korea, satisfying Director Ma with her excellent skills. Oh Ji Young and Kim Hyung Joon decide to participate in the Miss Korea pageant with different motives, first preparing for the 'Mandarin Lady Pageant'. Director Ma attends the 'Mandarin Lady Pageant' as a judge, where Ji Young is scheduled to compete.
Yoon promises to fully support ViVi Cosmetics if their Miss Korea wins, so Hyung Joon, Hong Sam, and Kang Woo search for beautiful women they know. Ji Young takes Director Ma's business card and visits Queen Beauty Salon.
Hyung Joon tries to launch a cosmetics business with the help of his wealthy friend Yoon, but Yoon refuses. Hong Sam suggests they save the company by creating a Miss Korea. Meanwhile, Hyung Joon seeks out Oh Ji Young, who was the queen bee in his high school days.
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.
To find the suddenly vanished Yeo Wool, Kang Chi seeks out Wol Ryung in the forest. Kang Chi begins to fight Wol Ryung to save her. Meanwhile, Ja Hong Myung meets with Jo Gwan Woong, stating she wishes to buy one of his properties.
Gu Wol Ryung appears at the school and tells Kang Chi to give up on becoming human. After Wol Ryung attacks and vanishes, the school members mistake him for Kang Chi. Meanwhile, Ja Hong Myung summons Tae Seo and asks if he is one of Jo Gwan Woong's men.
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.
Yeo Wool is deeply shocked to see Kang Chi transform into a half-human, half-beast before her eyes and reports it to Dam Pyung Joon. Kang Chi, unable to accept his hidden beastly nature, is tormented.
Enraged by Jo Gwan Woong's atrocities, Kang Chi's eyes turn red, and he lunges at him. Jo Gwan Woong frames Park Mu Sol for high treason and Kang Chi for murder.
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.
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.
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